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What changed in CareCloud, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of CareCloud, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+341 added−293 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-21)

Top changes in CareCloud, Inc.'s 2024 10-K

341 paragraphs added · 293 removed · 242 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeTo that end, we invest significant resources toward improving our current offerings and building new solutions that help transform our clients’ organizations with next generation technology. We expect to have increased software capabilities and offer additional complementary business services that will address the needs of the ever-changing, dynamic market conditions of the U.S. healthcare space.
Biggest changeWe expect to have increased software capabilities and offer additional complementary business services that will address the needs of the ever-changing, dynamic market conditions of the U.S. healthcare space. To achieve our objective and mission, we employ the following strategies: Providing comprehensive next generation RCM solutions to medical practices and hospitals.
CareCloud.com, CareCloud, MTBC, A Unique Healthcare IT Company, and other trademarks and service marks of CareCloud appearing in this Annual Report on Form 10-K are the property of CareCloud. Trade names, trademarks and service marks of other companies appearing in this Annual Report on Form 10-K are the property of their respective holders. We are a smaller reporting company.
CareCloud.com, CareCloud, MTBC, A Unique Healthcare IT Company, and other trademarks and service marks of CareCloud appearing in this Annual Report on Form 10-K are the property of the Company. Trade names, trademarks and service marks of other companies appearing in this Annual Report on Form 10-K are the property of their respective holders. We are a smaller reporting company.
Our solutions enable clients to increase financial and operational performance, streamline clinical workflows, get better insight through data, and make better business and clinical decisions, resulting in improvement in patient care and collections while reducing administrative burdens and operating costs. 8 We create elegant, user-friendly applications that solve many of the challenges facing healthcare organizations.
Our solutions enable clients to increase financial and operational performance, streamline clinical workflows, get better insight through data, and make better business and clinical decisions, resulting in improvement in patient care and collections while reducing administrative burdens and operating costs. We create elegant, user-friendly applications that solve many of the challenges facing healthcare organizations.
This tool streamlines post-training and onboarding for new staff, reducing response times and providing real-time assistance, ultimately saving time. 7 ● AI-Driven Appeals: CareCloud cirrusAI Appeals generates customized appeal letters by analyzing patient claim details, the appeal’s reason, and the specific payer involved for healthcare workers to review, edit, and send.
This tool streamlines post-training and onboarding for new staff, reducing response times and providing real-time assistance, ultimately saving time. ● AI-Driven Appeals: CareCloud cirrusAI Appeals generates customized appeal letters by analyzing patient claim details, the appeal’s reason, and the specific payer involved for healthcare workers to review, edit, and send.
We continually update our software and technology infrastructures, regularly execute releases of new software enhancements, and adapt our offerings to better serve our medical group and health system clients confronting rapid changes in the healthcare market space. 11 Our agile software development methodology is designed to ensure that each software release is properly designed, built, tested, and released.
We continually update our software and technology infrastructures, regularly execute releases of new software enhancements, and adapt our offerings to better serve our medical group and health system clients confronting rapid changes in the healthcare market space. Our agile software development methodology is designed to ensure that each software release is properly designed, built, tested, and released.
We intend to continue to enhance our solutions with new functionality and features leveraging our own teams, partnerships, and acquisitions. We will continue to dedicate resources to research and development to bolster our existing applications and drive new opportunities for innovation on behalf of our clients. Expanding into new categories/specialties/markets.
We intend to continue to enhance our solutions with new functionality and features leveraging our own teams, partnerships, and acquisitions. We will continue to dedicate resources to research and development to bolster our existing applications and drive new opportunities for innovation on behalf of our clients. 11 Expanding into new categories/specialties/markets.
This innovation can lead to enhanced diagnosis accuracy and treatment planning. ● AI-Powered Virtual Support Assistant: CareCloud cirrusAI Chat facilitates natural language conversations with practice staff members, offering valuable assistance in navigating CareCloud Electronic Health Records (“EHR”) workflows.
This innovation can lead to enhanced diagnosis accuracy and treatment planning. 8 ● AI-Powered Virtual Support Assistant: CareCloud cirrusAI Chat facilitates natural language conversations with practice staff members, offering valuable assistance in navigating CareCloud Electronic Health Records (“EHR”) workflows.
We continue to leverage and optimize various digital channels to present our solutions, identify national events to demonstrate our integrated capabilities and expand our participation in thought leadership and social communications to connect with the healthcare community. 12 Our Growth Levers We believe that we are in a good position to grow through organic growth and partnerships.
We continue to leverage and optimize various digital channels to present our solutions, identify national events to demonstrate our integrated capabilities and expand our participation in thought leadership and social communications to connect with the healthcare community. 14 Our Growth Levers We believe that we are in a good position to grow through organic growth and partnerships.
Much of this change is driving executives and leaders to assess their IT and data strategy and reevaluate their adoption of next generation healthcare solutions. The healthcare industry has seen tremendous change over the last three years, with COVID-19 ushering in a new era of digital health.
Much of this change is driving executives and leaders to assess their IT and data strategy and reevaluate their adoption of next generation healthcare solutions. The healthcare industry has seen tremendous change over the last few years, with COVID-19 ushering in a new era of digital health.
Item 1. Business Overview CareCloud, Inc., (together with its consolidated subsidiaries, “CareCloud”, the “Company,” “we,” “us” and/or “our”) is a leading provider of technology-enabled services and solutions that redefine the healthcare revenue cycle management process.
Item 1. Business Overview CareCloud, Inc., (together with its consolidated subsidiaries, “CareCloud”, the “Company,” “we,” “us” and/or “our”) is a leading provider of technology-enabled services and generative AI solutions that redefine the healthcare revenue cycle management process.
During 2024, we anticipate further reducing our employee count. Voting Rights of Our Directors, Executive Officers, and Principal Stockholders As of December 31, 2023, approximately 38% of both the shares of our common stock and voting power of our common stock are held by our directors and executive officers.
During 2025, we anticipate further reducing our employee count. Voting Rights of Our Directors, Executive Officers, and Principal Stockholders As of December 31, 2024, approximately 38% of both the shares of our common stock and voting power of our common stock are held by our directors and executive officers.
As a smaller reporting company, we have reduced disclosure obligations regarding executive compensation in our Annual Report, periodic reports and proxy statements and providing only two years of audited financial statements in our Annual Report and our periodic reports.
As a smaller reporting company, we have reduced disclosure obligations regarding executive compensation in our Annual Report, periodic reports and proxy statements and provide only two years of audited financial statements in our Annual Report and our periodic reports.
Pricing pressures could negatively impact our margins, growth rate and market share. 13 We believe we have a competitive advantage, as we are able to deliver our industry-leading solutions at competitive prices because we leverage a combination of our proprietary software, which automates our workflows and increases efficiency, together with a global team that includes more than 300 experienced health industry experts onshore.
Pricing pressures could negatively impact our margins, growth rate and market share. 15 We believe we have a competitive advantage, as we are able to deliver our industry-leading solutions at competitive prices because we leverage a combination of our proprietary software, which automates our workflows and increases efficiency, together with a global team that includes more than 250 experienced health industry experts onshore.
Our unique business model has allowed us to become a leading consolidator in our industry sector, gaining us a reputation for acquiring and positively transforming distressed competitors into an accretive acquisition. Employees Including the employees of our subsidiaries, as of December 2023, the Company employed approximately 3,600 people worldwide on a full-time basis.
Our unique business model has allowed us to become a leading consolidator in our industry sector, gaining us a reputation for acquiring and positively transforming distressed competitors into an accretive acquisition. Employees Including the employees of our subsidiaries, as of December 2024, the Company employed approximately 3,650 people worldwide on a full-time basis.
Also, the SEC’s website (www.sec.gov) contains reports, proxy and information statements, and other information that we file electronically with the SEC. 14
Also, the SEC’s website (www.sec.gov) contains reports, proxy and information statements, and other information that we file electronically with the SEC. 16
This year the Company is not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended. The Company is a non-accelerated filer. Where You Can Find More Information Our website, which we use to communicate important business information, can be accessed at: www.CareCloud.com.
For 2024, the Company was not required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended. The Company is a non-accelerated filer. Where You Can Find More Information Our website, which we use to communicate important business information, can be accessed at: www.CareCloud.com.
Market Overview In June 2023, Centers for Medicare & Medicaid Services (“CMS”) 1 reported that over 2022-2031 the average National Health Expenditures (“NHE”) growth (5.4%) is projected to outpace that of average Gross Domestic Product (“GDP”) growth (4.6%) resulting in an increase in the health spending share of GDP from 18.3% in 2021 to 19.6% in 2031.
Market Overview In June 2024, Centers for Medicare & Medicaid Services (“CMS”) 1 reported that over 2023-2032, the average National Health Expenditures (“NHE”) growth (5.6%) is projected to outpace that of average Gross Domestic Product (“GDP”) growth (4.3%) resulting in an increase in the health spending share of GDP from 17.3% in 2022 to 19.7% in 2032.
These experts are supported by our highly educated and specialized offshore workforce of approximately 3,200 team members at labor costs that we believe are approximately one-tenth the cost of comparable U.S. employees.
These experts are supported by our highly educated and specialized offshore workforce of approximately 3,300 team members at labor costs that we believe are approximately 15% the cost of comparable U.S. employees.
Our medical practice management solutions include: ● Medical practice management: ○ Medical practice management services are provided to medical practices. In this service model, we provide the medical practice with appropriate facilities, equipment, supplies, support services, nurses and administrative support staff. We also provide management, bill-paying and financial advisory services.
Our medical practice management solutions include: ● Medical practice management: ○ Medical practice management services are provided to medical practices. In this service model, we provide the medical practice with appropriate facilities, equipment, supplies, support services, nurses and administrative support staff.
The modernization of the healthcare industry, along with the increased adoption of value-based care models, is transforming nearly every aspect of a healthcare organization from policy to providers; clinical care to member services, devices to data, and ultimately the quality of the patient’s experience as a healthcare consumer.
We also provide management, bill-paying and financial advisory services. 9 The modernization of the healthcare industry, along with the increased adoption of value-based care models, is transforming nearly every aspect of a healthcare organization from policy to providers; clinical care to member services, devices to data, and ultimately the quality of the patient’s experience as a healthcare consumer.
In most cases the standard fee for our complete, integrated, end-to-end solution is based upon a percentage of each client’s healthcare-related revenues, with a monthly minimum fee, plus a nominal one-time setup fee, which is competitively priced.
We believe that our fully integrated solutions uniquely address the challenges in the industry. In most cases the standard fee for our complete, integrated, end-to-end solution is based upon a percentage of each client’s healthcare-related revenues, with a monthly minimum fee, plus a nominal one-time setup fee, which is competitively priced.
Approximately 71% of our employees are focused on service and client delivery functions, approximately 10% are assigned to research and development, and approximately 2% are engaged in sales and marketing.
Approximately 75% of our employees are focused on service and client delivery functions, approximately 9% are assigned to research and development, and approximately 1% are engaged in sales and marketing.
We have a direct sales force including team members focused on specific functional or divisional areas, such as CareCloud Force (workforce augmentation) and medSR (healthcare IT consulting). This direct sales force is supplemented by offshore staff who support our sales and marketing efforts 24 hours per day.
We have a direct sales force including team members focused on specific functional or divisional areas, such as CareCloud Force (workforce augmentation) and medSR (healthcare IT consulting). This direct sales force is supplemented by offshore staff who support our sales and marketing efforts. In addition, our direct sales are augmented through our partner initiatives and marketing campaigns.
EHR market is expected to be valued at $40 billion by 2030 with a CAGR of 12.5% from 2022 to 2030. 4 The Telehealth market is estimated to be approximately $30 billion in 2022 with a CAGR of 23% from 2023 to 2030. 5 Our Market Opportunity Considering the evolving needs of our clients and the market, we believe we continue to be uniquely positioned to provide tremendous value and support for our clients.
EHR market was estimated to be valued at $11.4 billion in 2023 and expected to grow at a CAGR of 2.24% from 2024 to 2030. 4 The Telehealth market is estimated to be approximately $42.54 billion in 2024 with a CAGR of 23.8% from 2025 to 2030. 5 Our Market Opportunity Considering the evolving needs of our clients and the market, we believe we continue to be uniquely positioned to provide tremendous value and support for our clients.
We offer an integrated partner ecosystem providing healthcare organizations access to a variety of innovative solutions that complement our suite of products and services. Our partner ecosystem is a comprehensive collection of apps, services, specialty solutions, and clinical connections.
We offer an integrated partner ecosystem providing healthcare organizations access to a variety of innovative solutions that complement our suite of products and services. Our partner ecosystem is a comprehensive collection of apps, services, specialty solutions, and clinical connections. This is an integral part of our vision to be the premier cloud-based platform for healthcare.
Clients We estimate that as of December 31, 2023, we provided software and services to approximately 40,000 providers (which we define as physicians, nurses, nurse practitioners, therapists, physician assistants and other clinicians that render bills for their services) practicing in approximately 2,600 independent medical practices and hospitals, representing 80 specialties and subspecialties in 50 states allowing for low revenue concentration risk.
We also employ product management, user experience, and product marketing personnel who work continually on improvements to our products and services design. 13 Clients We estimate that as of December 31, 2024, we provided software and services to approximately 40,000 providers (which we define as physicians, nurses, nurse practitioners, therapists, physician assistants and other clinicians that render bills for their services) practicing in approximately 2,600 independent medical practices and hospitals, representing 80 specialties and subspecialties in 50 states allowing for low revenue concentration risk.
Additionally, analysts from The Brainy Research have estimated the U.S.
Additionally, analysts from the Imarc have estimated the U.S.
Healthcare IT industry market to be approximately $105 billion in 2022 and is projected to reach $370.5 billion by 2032, growing at a 13.4% compound annual growth rate (“CAGR”). 2 Its largest sub-segment, RCM, is reported to be nearly $140 billion in 2022 and is estimated to grow at a 10% CAGR through 2030 according to Grand View Research. 3 The U.S.
Healthcare IT industry market to be approximately $104 billion in 2024 and is projected to reach $325.2 billion by 2033, growing at a 13.1% compound annual growth rate (“CAGR”). 2 Its largest sub-segment, RCM, is reported to be nearly $155.6 billion in 2023 and is projected to grow at a 10.18% CAGR through 2030 according to Grand View Research. 3 The U.S.
The complexities associated with emerging reimbursement models and continued government regulations present opportunities for us as healthcare organizations seek out partners that offer a broad range of software and services to help meet their needs.
This ever-evolving regulatory landscape increases the pressure placed on healthcare organizations to stay abreast of these changes and to remain in compliance. The complexities associated with emerging reimbursement models and continued government regulations present opportunities for us as healthcare organizations seek out partners that offer a broad range of software and services to help meet their needs.
Medical practices and health systems alike are transitioning to increasingly complex reimbursement delivery models. As an example, the industry has been gradually shifting from fee-for-service payments to value-based/clinical outcomes-based care payments. This transition comes in a multitude of forms including reimbursement models associated with quality incentive programs, capitation payments models, bundled payments, and at-risk payer contracts.
Medical practices and health systems alike are transitioning to increasingly complex reimbursement delivery models. As an example, the industry has been gradually shifting from fee-for-service payments to value-based/clinical outcomes-based care payments.
Our robust product and service portfolio allows us to be both methodical and nimble across the healthcare organizations and market segments we serve while providing a framework to create solution sets for the market today and more importantly, for what our clients will need tomorrow. We believe that our fully integrated solutions uniquely address the challenges in the industry.
The interconnectivity of our solutions will continue driving a consolidation of brands within our product architecture, aimed at improving the awareness and alignment of our products to targeted industry segments. 12 Our robust product and service portfolio allows us to be both methodical and nimble across the healthcare organizations and market segments we serve while providing a framework to create solution sets for the market today and more importantly, for what our clients will need tomorrow.
In the longer term, we also envision how this will allow for frictionless flow of information and care-coordination capabilities between medical providers and their patients.
As the market continues to evolve, we may choose to build or partner for some or all of these solutions in order to broaden our product set. In the longer term, we also envision how this will allow for frictionless flow of information and care-coordination capabilities between medical providers and their patients.
Our expansive product and services portfolio enables us to displace competitors and gain market share across a vast array of specialties, care settings and customer segments across the country. Our Business Strategy The Company is focused on reducing costs, returning to profitability and generating positive free cash flow in order to resume paying the Preferred Stock dividends.
Our expansive product and services portfolio enables us to displace competitors and gain market share across a vast array of specialties, care settings and customer segments across the country.
Our study of the evolving needs of our clients leads us to believe that there will be an increasing need for our services and products and emerging needs for the products and services that we are already developing. 1 CMS – National Health Expenditure Historical 2 The Brainy Research – US Healthcare IT Market 3 U.S.
Our study of the evolving needs of our clients leads us to believe that there will be an increasing need for our services and products and emerging needs for the products and services that we are already developing. These trends will fuel growth over the next several years.
CareCloud is a market leading provider of technology-enabled and integrated end-to-end Software-as-a-Service (“SaaS”) solutions that help our clients with the business of medicine. Our mission is to redefine the next generation of technology-enabled revenue cycle solutions.
Our Business Strategy The Company is focused on reducing costs, maintaining profitability and generating positive free cash flow in order to continue paying the Preferred Stock dividends, including those that are in arrears. CareCloud is a market leading provider of technology-enabled and integrated end-to-end Software-as-a-Service (“SaaS”) solutions that help our clients with the business of medicine.
There are continuing legislative and regulatory reform efforts, as well as growing compliance requirements mandated by the federal government and other governmental agencies. This ever-evolving regulatory landscape increases the pressure placed on healthcare organizations to stay abreast of these changes and to remain in compliance.
Electronic Health Records Market | Industry Report 2030 5 U.S. Telehealth Market Size & Share | Industry Report, 2030 10 There are continuing legislative and regulatory reform efforts, as well as growing compliance requirements mandated by the federal government and other governmental agencies.
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Revenue Cycle Management Market Size Report, 2030 (grandviewresearch.com) 4 US Electronic Health Record Market Set to Surge to $39.993 Billion by 2030 with Notable CAGR of 12.5% (yahoo.com) 5 Healthcare IT Market in US Size, Share, Trends | Report 2030 (alliedmarketresearch.com) 9 These trends will fuel growth over the next several years.
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This transition comes in a multitude of forms including reimbursement models associated with quality incentive programs, capitation payments models, bundled payments, and at-risk payer contracts. 1 National Health Expenditure Projections 2023-2032 2 U.S. Healthcare IT Market Size, Share, Growth 2025-2033 3 U.S. Revenue Cycle Management Market Size Report, 2030 4 U.S.
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To achieve our objective and mission, we employ the following strategies: Providing comprehensive next generation RCM solutions to medical practices and hospitals.
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Our mission is to redefine the next generation of technology-enabled revenue cycle solutions. To that end, we invest significant resources toward improving our current offerings and building new solutions that help transform our clients’ organizations with next generation technology.
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This is an integral part of our vision to be the premier cloud-based platform for healthcare. 10 As the market continues to evolve, we may choose to build or partner for some or all of these solutions in order to broaden our product set.
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The interconnectivity of our solutions will continue driving a consolidation of brands within our product architecture, aimed at improving the awareness and alignment of our products to targeted industry segments.
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We also employ product management, user experience, and product marketing personnel who work continually on improvements to our products and services design.
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In addition, our direct sales are augmented through our partner initiatives and marketing campaigns.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe are a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors. There are many exemptions available to smaller reporting companies like us that have less than $250 million of worldwide common equity held by non-affiliates.
Biggest changeThere are many exemptions available to smaller reporting companies like us that have less than $250 million of worldwide common equity held by non-affiliates. The disclosures we will be required to provide in our SEC filings are still less than they would be if we were not considered a smaller reporting company.
Any such claims or lawsuit could: ● be time-consuming and expensive to defend, whether meritorious or not; 19 ● require us to stop providing products or services that use the technology that allegedly infringes the other party’s intellectual property; ● divert the attention of our technical and managerial resources; ● require us to enter into royalty or licensing agreements with third-parties, which may not be available on terms that we deem acceptable; ● prevent us from operating all or a portion of our business or force us to redesign our products, services or technology platforms, which could be difficult and expensive and may make the performance or value of our product or service offerings less attractive; ● subject us to significant liability for damages or result in significant settlement payments; and/or ● require us to indemnify our customers.
Any such claims or lawsuit could: ● be time-consuming and expensive to defend, whether meritorious or not; ● require us to stop providing products or services that use the technology that allegedly infringes the other party’s intellectual property; ● divert the attention of our technical and managerial resources; ● require us to enter into royalty or licensing agreements with third-parties, which may not be available on terms that we deem acceptable; ● prevent us from operating all or a portion of our business or force us to redesign our products, services or technology platforms, which could be difficult and expensive and may make the performance or value of our product or service offerings less attractive; ● subject us to significant liability for damages or result in significant settlement payments; and/or ● require us to indemnify our customers.
If our applications do not function reliably or fail to achieve customer expectations in terms of performance, customers could assert liability claims against us or attempt to cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain customers. There are particular risks when we inherit technologies through the companies we acquire.
If our applications do not function reliably or fail to achieve customer expectations in terms of performance, customers could assert liability claims against us or attempt to cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain customers. 22 There are particular risks when we inherit technologies through the companies we acquire.
Our independent audit committee has reviewed these arrangements and continues to do so on an annual basis. 23 Although we have procedures in place to identify related party transactions, it is possible that such transactions could occur without being contemporaneously identified, reviewed and approved by the Audit Committee. We depend on key information systems and third-party service providers.
Our independent audit committee has reviewed these arrangements and continues to do so on an annual basis. Although we have procedures in place to identify related party transactions, it is possible that such transactions could occur without being contemporaneously identified, reviewed and approved by the Audit Committee. We depend on key information systems and third-party service providers.
Further, there can be no assurance that technological advances by one or more of our competitors or future competitors will not result in our present or future applications and services becoming uncompetitive or obsolete. Our business, financial condition, results of operations and growth may be adversely affected by pandemics, epidemics or other public health emergencies, such as COVID-19.
Further, there can be no assurance that technological advances by one or more of our competitors or future competitors will not result in our present or future applications and services becoming uncompetitive or obsolete. 27 Our business, financial condition, results of operations and growth may be adversely affected by pandemics, epidemics or other public health emergencies, such as COVID-19.
As a “smaller reporting company,” we elected to avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. We were not required to have this attestation performed for the years 2023 or 2022.
As a “smaller reporting company,” we elected to avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. We were not required to have this attestation performed for the years 2024, 2023 or 2022.
In addition, cancellation of any implementation after it has begun may involve loss to us of time, effort, and expenses invested in the canceled implementation process, and lost opportunity for implementing paying customers in that same period of time. We are required to collect sales and use taxes on certain products and services we sell in certain jurisdictions.
In addition, cancellation of any implementation after it has begun may involve loss to us of time, effort, and expenses invested in the canceled implementation process, and lost opportunity for implementing paying customers in that same period of time. 19 We are required to collect sales and use taxes on certain products and services we sell in certain jurisdictions.
We cannot assure you that we will not be subject to sales and use taxes or related penalties for past sales in states where we believe no compliance is necessary. 17 If the federal government were to impose a tax on imports or services performed abroad, we might be subject to additional liabilities.
We cannot assure you that we will not be subject to sales and use taxes or related penalties for past sales in states where we believe no compliance is necessary. If the federal government were to impose a tax on imports or services performed abroad, we might be subject to additional liabilities.
Many factors may lead to decreases in customer revenue, including: ● reduction of customer revenue as a result of changes to the Affordable Care Act (“ACA”) or fluctuations in medical appointments due to future pandemics; ● a rollback of the expansion of Medicaid or other governmental programs; ● reduction of customer revenue resulting from increased competition or other changes in the marketplace for physician services; ● failure of our customers to adopt or maintain effective business practices; ● actions by third-party payers of medical claims to reduce reimbursement; ● government regulations and government or other payer actions or inactions reducing or delaying reimbursement; ● interruption of customer access to our system; and ● our failure to provide services in a timely or high-quality manner.
Many factors may lead to decreases in customer revenue, including: ● reduction of customer revenue as a result of changes to the Patient Protection and Affordable Care Act (“ACA”) or fluctuations in medical appointments due to future pandemics; ● a rollback of the expansion of Medicaid or other governmental programs; ● reduction of customer revenue resulting from increased competition or other changes in the marketplace for physician services; ● failure of our customers to adopt or maintain effective business practices; ● actions by third-party payers of medical claims to reduce reimbursement; ● government regulations and government or other payer actions or inactions reducing or delaying reimbursement; ● interruption of customer access to our system; and ● our failure to provide services in a timely or high-quality manner.
The sales cycle for our services can be variable, typically ranging from two to four months from initial contact with a potential customer to contract execution to six to twelve months to rollout services which require each patient to participate.
The sales cycle for our services can be variable, typically ranging from two to four months from initial contact with a potential customer to contract execution to six to twelve months to rollout services which require each customer to participate.
There was a triggering event at August 31, 2023, but it was determined that there was no impairment. During December 2023, the Company had an additional triggering event as a result of the suspension of the dividends on the Preferred Stock.
There was a triggering event at August 31, 2023, but it was determined that there was no impairment. During December 2023, the Company had an additional triggering event as a result of the suspension of the payment of the dividends on the Preferred Stock.
A failure by us to timely adapt to ever changing technologies or our failure to regularly upgrade existing or introduce new products or to introduce these products on schedule could cause us to not only lose our current customers but also fail to attract new customers. 15 The continued success of our business model is heavily dependent upon our offshore operations, and any disruption to those operations will adversely affect us.
A failure by us to timely adapt to ever changing technologies or our failure to regularly upgrade existing or introduce new products or to introduce these products on schedule could cause us to not only lose our current customers but also fail to attract new customers. 17 The continued success of our business model is heavily dependent upon our offshore operations, and any disruption to those operations will adversely affect us.
If this trend continues, we cannot assure you that we will be able to continue to maintain or expand our customer base, negotiate contracts with acceptable terms, or maintain our current pricing structure, which would result in a decrease in our revenues and market share. 16 If providers do not purchase our products and services or delay in choosing our products or services, we may not be able to grow our business.
If this trend continues, we cannot assure you that we will be able to continue to maintain or expand our customer base, negotiate contracts with acceptable terms, or maintain our current pricing structure, which would result in a decrease in our revenues and market share. 18 If providers do not purchase our products and services or delay in choosing our products or services, we may not be able to grow our business.
In addition, whether there is an actual or a perceived breach of our security, the market perception of the effectiveness of our security measures could be harmed and we could lose current or potential customers. 21 Our products and services are required to meet the interoperability standards, which could require us to incur substantial additional development costs or result in a decrease in revenue.
In addition, whether there is an actual or a perceived breach of our security, the market perception of the effectiveness of our security measures could be harmed and we could lose current or potential customers. 23 Our products and services are required to meet the interoperability standards, which could require us to incur substantial additional development costs or result in a decrease in revenue.
As a result of the December triggering event, the Company recorded additional impairment charges of approximately $40 million and we cannot predict if or when additional future goodwill impairments may occur. Any additional goodwill impairments could have material adverse effects on our operating results, net assets, or our cost of, or access to, capital, which could harm our business.
As a result of a December 2023 triggering event, the Company recorded additional impairment charges of approximately $40 million. We cannot predict if or when additional future goodwill impairments may occur. Any additional goodwill impairments could have material adverse effects on our operating results, net assets, or our cost of, or access to, capital, which could harm our business.
Should inaccurate claims data be submitted to payers, we may experience poor operational results and be subject to liability claims, which could damage our reputation with customers and result in liability claims that increase our expenses. 22 Failure by our clients to obtain proper permissions and waivers may result in claims against us or may limit or prevent our use of data, which could harm our business.
Should inaccurate claims data be submitted to payers, we may experience poor operational results and be subject to liability claims, which could damage our reputation with customers and result in liability claims that increase our expenses. 24 Failure by our clients to obtain proper permissions and waivers may result in claims against us or may limit or prevent our use of data, which could harm our business.
Our intellectual property rights may not be sufficient to help us maintain our position in the market and our competitive advantages. 18 Trade secrets may not be protectable if not properly kept confidential. We strive to enter into non-disclosure agreements with our employees, customers, contractors and business partners to limit access to and disclosure of our proprietary information.
Our intellectual property rights may not be sufficient to help us maintain our position in the market and our competitive advantages. 20 Trade secrets may not be protectable if not properly kept confidential. We strive to enter into non-disclosure agreements with our employees, customers, contractors and business partners to limit access to and disclosure of our proprietary information.
We believe that the labor costs in our Offshore Offices are approximately 9% of the cost of comparably educated and skilled workers in the U.S. If there were potential disruptions in any of these locations, they could have a negative impact on our business.
We believe that the labor costs in our Offshore Offices are approximately 15% of the cost of comparably educated and skilled workers in the U.S. If there were potential disruptions in any of these locations, they could have a negative impact on our business.
The majority of our operations, including the development and maintenance of our web-based platform, our customer support services and medical billing activities, are performed by our highly educated workforce of approximately 3,200 employees in our Offshore Offices.
The majority of our operations, including the development and maintenance of our web-based platform, our customer support services and medical billing activities, are performed by our highly educated workforce of approximately 3,300 employees in our Offshore Offices.
Foreign operations subject us to numerous stringent U.S. and foreign laws, including the Foreign Corrupt Practices Act (“FCPA”), and comparable foreign laws and regulations that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. and other business entities for the purpose of obtaining or retaining business.
Foreign operations subject us to numerous stringent U.S. and foreign laws, including the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”), and comparable foreign laws and regulations that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. and other business entities for the purpose of obtaining or retaining business.
These factors include, but are not limited to, the following: ● suspension of the dividend payments in December 2023; ● prevailing interest rates, increases in which may have an adverse effect on the market price of the Preferred Stock; 33 ● trading prices of similar securities; ● the annual yield from dividends on the Preferred Stock as compared to yields on other financial instruments; ● general economic and financial market conditions; ● government action or regulation; ● our financial condition, performance and prospects of our competitors; ● changes in financial estimates or recommendations by securities analysts with respect to us or our competitors in our industry; ● our issuance of additional preferred equity or debt securities; and ● actual or anticipated variations in quarterly operating results of us and our competitors.
These factors include, but are not limited to, the following: ● suspension of the dividend payments in December 2023 which were not resumed until February 2025; ● prevailing interest rates, increases in which may have an adverse effect on the market price of the Preferred Stock; ● trading prices of similar securities; ● the annual yield from dividends on the Preferred Stock as compared to yields on other financial instruments; ● general economic and financial market conditions; ● government action or regulation; ● our financial condition, performance and prospects of our competitors; ● changes in financial estimates or recommendations by securities analysts with respect to us or our competitors in our industry; ● our issuance of additional preferred equity or debt securities; and ● actual or anticipated variations in quarterly operating results of us and our competitors.
The Preferred Stock is not convertible into the common stock and earns dividends at a fixed rate. Accordingly, an increase in the market price of our common stock will not necessarily result in an increase in the market price of our Preferred Stock.
The Preferred Stock is not convertible into common stock at the option of the holder and earns dividends at a fixed rate. Accordingly, an increase in the market price of our common stock will not necessarily result in an increase in the market price of our Preferred Stock.
We may be adversely affected by global climate change or by legal, regulatory, or market responses to such change. The long-term effects of climate change are difficult to predict and may be widespread.
We may be adversely affected by global climate change or market responses to such change. The long-term effects of climate change are difficult to predict and may be widespread.
If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may not be perceived as secure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities.
If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities.
Other than the limited circumstances and except to the extent required by law, holders of Preferred Stock do not have any other voting rights. The Preferred Stock is not convertible, and investors will not realize a corresponding upside if the price of the common stock increases.
Other than the limited circumstances and except to the extent required by law, holders of Preferred Stock do not have any other voting rights. The Preferred Stock is not convertible at the option of the holder, and investors will not realize a corresponding upside if the price of the common stock increases.
Because of the sensitivity of this information and due to requirements under applicable laws and regulations, the effectiveness of our security efforts is very important. We maintain servers, which store customers’ data, including patient health records, in the U.S. and offshore.
Because of the sensitivity of this information and due to requirements under applicable laws and regulations, the effectiveness of our security efforts is very important. We maintain servers, which store customers’ data, in the U.S. and offshore. Servers that store patient health records are stored in the U.S.
Future issuances and sales of senior or pari passu preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for the Preferred Stock and our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us. 32 Market interest rates may materially and adversely affect the value of the Preferred Stock.
Future issuances and sales of senior or pari passu preferred stock, or the perception that such issuances and sales could occur, may cause prevailing market prices for the Preferred Stock and our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us.
In order to operate more efficiently, control costs and improve profitability, we incurred $645,000 of restructuring costs in 2023, primarily consisting of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements. We expect to incur approximately an additional $250,000 of restructuring costs in 2024.
In order to operate more efficiently, control costs and improve profitability, we incurred $606,000 and $645,000 of restructuring costs in 2024 and 2023, respectively, primarily consisting of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements. We expect to incur approximately an additional $100,000 of restructuring costs in 2025.
An increase in market interest rates may lead prospective purchasers of the Preferred Stock to expect a higher dividend yield (and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividend payments). Thus, higher market interest rates could cause the market price of the Preferred Stock to materially decrease.
An increase in market interest rates may lead prospective purchasers of the Preferred Stock to expect a higher dividend yield (and higher interest rates would likely increase our borrowing costs and potentially decrease funds available for dividend payments).
Hadi Chaudhry as Chief Executive Officer and President, or other members of our management team, or if we are unable to attract, hire, integrate and retain other necessary employees, our business would be harmed. Our future success depends in part on our ability to attract, hire, integrate and retain the members of our management team and other qualified personnel.
Hadi Chaudhry and Stephen Snyder as Co-Chief Executive Officers, or other members of our management team, or if we are unable to attract, hire, integrate and retain other necessary employees, our business would be harmed. Our future success depends in part on our ability to attract, hire, integrate and retain the members of our management team and other qualified personnel.
The impacts may include physical risks (such as severe rains and flooding as a result of climate change that has been experienced in Pakistan), social and human effects (such as population dislocations or harm to health and well-being), compliance costs and transition risks (such as regulatory or technology changes), and other adverse effects.
The impacts may include physical risks (such as severe rains and flooding as a result of climate change that has been experienced in Pakistan), social and human effects (such as population dislocations or harm to health and well-being), and other adverse effects.
At December 31, 2023, our total liabilities equaled approximately $36.1 million. Certain of our existing or future debt instruments may restrict the authorization, payment or setting apart of dividends on the Preferred Stock. Our Credit Agreement with SVB restricts the payment of dividends in the event of any event of default, including failure to meet certain financial covenants.
At December 31, 2024, our total liabilities equaled approximately $21.8 million. 35 Certain of our existing or future debt instruments may restrict the authorization, payment or setting apart of dividends on the Preferred Stock. Our Credit Agreement with SVB restricts the payment of dividends in the event of any event of default, including failure to meet certain financial covenants.
In particular, we are dependent on the services of Mahmud Haq, our founder, principal stockholder and Executive Chairman, and A. Hadi Chaudhry, our Chief Executive Officer and President. Mr. Haq is instrumental in managing our offshore operations in our Pakistan Offices and coordinating those operations with our U.S. activities. The loss of Mr.
In particular, we are dependent on the services of Mahmud Haq, our founder, principal stockholder and Executive Chairman, and A. Hadi Chaudhry and Stephen Snyder as Co-Chief Executive Officers. Mr. Haq is instrumental in managing our offshore operations in our Pakistan Offices and coordinating those operations with our U.S. activities. The loss of Mr.
Moreover, if we are not able to stay in compliance with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies any deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. 30 Furthermore, investor perceptions of our Company may suffer if deficiencies are found, and this could cause a decline in the market price of our common and preferred stock.
Moreover, if we are not able to stay in compliance with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies any deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.
We cannot predict with certainty whether we will remain in compliance with the covenants of our senior secured lender, Silicon Valley Bank, a division First Citizens Bank, (“SVB”), which include, among other things, generating adjusted EBITDA or complying with a minimum liquidity ratio at times when we are utilizing our line of credit.
We cannot predict with certainty whether we will remain in compliance with the covenants of our senior secured lender SVB, which include, among other things, generating adjusted EBITDA or complying with a minimum liquidity ratio at times when we are utilizing our line of credit.
A holder of Preferred Stock has extremely limited voting rights. The voting rights for a holder of Preferred Stock are limited. Our shares of common stock are the only class of our securities that carry full voting rights, and Mahmud Haq, our Executive Chairman, beneficially owns approximately 31.7% of our outstanding shares of common stock. As a result, Mr.
A holder of Preferred Stock has extremely limited voting rights. The voting rights for a holder of Preferred Stock are limited. Our shares of common stock are the only class of our securities that carry full voting rights, and Mahmud Haq, our Executive Chairman, beneficially owned approximately 31% of our outstanding shares of common stock as of December 31, 2024.
Specific factors that may cause fluctuations in our operating results include: ● demand and pricing for our products and services; ● the encounter volumes of our customer base; ● government or commercial healthcare reimbursement policies; ● physician and patient acceptance of any of our current or future products; ● introduction of competing products; ● our operating expenses which fluctuate due to growth of our business; ● timing and size of any new product or technology acquisitions we may complete; and ● variable sales cycle and implementation periods for our products and services. 29 Future sales of shares of our common stock could depress the market price of our common stock.
Specific factors that may cause fluctuations in our operating results include: ● demand and pricing for our products and services; ● the encounter volumes of our customer base; ● government or commercial healthcare reimbursement policies; ● physician and patient acceptance of any of our current or future products; ● introduction of competing products, services or technologies; ● our operating expenses which fluctuate due to growth of our business; ● changes in laws or regulations applicable to our products and services; ● timing and size of any new product or technology acquisitions we may complete; and ● variable sales cycle and implementation periods for our products and services.
The rapid evolution of AI, including potential government regulation of AI and its various uses will require significant resources to develop, test and maintain our intelligence cloud platform, offerings, services, and features to help us implement AI ethically in order to minimize any unintended, harmful impact. 24 Rapid technological change in the telehealth industry presents us with significant risks and challenges .
The rapid evolution of AI, including potential government regulation of AI and its various uses will require significant resources to develop, test and maintain our intelligence cloud platform, offerings, services, and features to help us implement AI ethically in order to minimize any unintended, harmful impact.
If and when the dividends are reinstated, we may not maintain sufficient cash to continue to pay dividends on the Preferred Stock and we cannot assure you that our businesses will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make the Preferred Stock dividend payments that are currently due or in arrears and to fund our other liquidity needs.
Although the Company resumed payment of the monthly dividends in February 2025, we may not maintain sufficient cash to continue to pay dividends on the Preferred Stock and we cannot assure you that our businesses will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to make the Preferred Stock dividend payments that are currently due or in arrears and to fund our other liquidity needs.
Despite testing, defects or errors may arise in our existing or new software or service processes. Because changes in payer requirements and practices are frequent and sometimes difficult to determine except through trial and error, we are continuously discovering defects and errors in our software and service processes compared against these requirements and practices.
Because changes in payer requirements and practices are frequent and sometimes difficult to determine except through trial and error, we are continuously discovering defects and errors in our software and service processes compared against these requirements and practices.
Risks Related to Our Acquisition Strategy At the current prices of our common and Preferred Stock, we may be unable to execute accretive acquisitions. Historically we have used our common and Preferred Stock to pay for acquisitions. Due to the depressed market prices of these securities, we may not be able to use these securities to execute future acquisitions.
At the current prices of our common and Preferred Stock, we may be unable to execute accretive acquisitions. Historically we have used our common and Preferred Stock to pay in part for acquisitions. Due to the lower market prices of these securities, we may not be able to use these securities to execute future acquisitions.
The HITECH Act transferred enforcement authority of the security rule from CMS to the Office for Civil Rights of HHS, thereby consolidating authority over the privacy and security rules under a single office within HHS.
The HITECH Act transferred enforcement authority of the security rule from CMS to the Office for Civil Rights of HHS, thereby consolidating authority over the privacy and security rules under a single office within HHS. Further, HITECH empowered state attorneys’ general to enforce HIPAA.
One of the factors that influences the price of the Preferred Stock is the dividend yield on the Preferred Stock (as a percentage of the market price of each class of the Preferred Stock) relative to market interest rates.
Market interest rates may materially and adversely affect the value of the Preferred Stock. One of the factors that influences the price of the Preferred Stock is the dividend yield on the Preferred Stock (as a percentage of the market price of each class of the Preferred Stock) relative to market interest rates.
Since inception, we have entered into several related-party transactions with our founder and Executive Chairman, Mahmud Haq, which subject us to significant contractual obligations. We believe these transactions reflect terms comparable to those that would be available from third parties.
These agreements are reviewed by our Audit Committee on an annual basis. Since inception, we have entered into several related-party transactions with our founder and Executive Chairman, Mahmud Haq, which subject us to significant contractual obligations. We believe these transactions reflect terms comparable to those that would be available from third parties.
While the Food and Drug Administration (“FDA”) has sometimes chosen to disclaim authority to, or to refrain from actively regulating certain software products which are similar to our products, this area of medical device regulation remains in flux.
Similarly, certain computer software products are regulated as medical devices under the Federal Food, Drug, and Cosmetic Act. While the Food and Drug Administration (“FDA”) has sometimes chosen to disclaim authority to, or to refrain from actively regulating certain software products which are similar to our products, this area of medical device regulation remains in flux.
Our Board of Directors has the authority to issue up to 7,000,000 shares of preferred stock and to determine the price, privileges and other terms of these shares, of which 4,526,231 shares of Series A Preferred Stock and 1,468,792 of Series B Preferred Stock have been issued as of December 31, 2023.
Our Board of Directors has the authority to issue up to 7,000,000 shares of preferred stock and to determine the price, privileges and other terms of these shares, of which 4,526,231 shares of Series A Preferred Stock and 1,511,372 of Series B Preferred Stock were issued as of December 31, 2024.
Any failure of our products or services to comply with these laws and regulations could result in substantial civil or criminal liability and could, among other things, adversely affect demand for our services, invalidate all or portions of some of our contracts with our customers, require us to change or terminate some portions of our business, require us to refund portions of our revenue, cause us to be disqualified from serving customers doing business with government payers, and give our customers the right to terminate our contracts with them, any one of which could have an adverse effect on our business. 28 Potential healthcare reform and new regulatory requirements placed on our products and services could increase our costs, delay or prevent our introduction of new products or services, and impair the function or value of our existing products and services.
Any failure of our products or services to comply with these laws and regulations could result in substantial civil or criminal liability and could, among other things, adversely affect demand for our services, invalidate all or portions of some of our contracts with our customers, require us to change or terminate some portions of our business, require us to refund portions of our revenue, cause us to be disqualified from serving customers doing business with government payers, and give our customers the right to terminate our contracts with them, any one of which could have an adverse effect on our business.
Also, payment of our dividends depends upon our financial condition, remaining in compliance with our affirmative and negative loan covenants with SVB, which we may be unable to do in the future, and other factors as our Board of Directors may deem relevant from time to time. 31 Our Series A and Series B Preferred Stock rank junior to all of our indebtedness and other liabilities.
Also, payment of our dividends depends upon our financial condition, remaining in compliance with our affirmative and negative loan covenants with SVB, which we may be unable to do in the future, and other factors as our Board of Directors may deem relevant from time to time.
Our Series A Preferred Stock ranks pari passu to our Series B Preferred Stock with respect to the distribution of assets upon our liquidation, dissolution or winding-up of our affairs.
Our Series A and Series B Preferred Stock rank junior to all of our indebtedness and other liabilities. Our Series A Preferred Stock ranks pari passu to our Series B Preferred Stock with respect to the distribution of assets upon our liquidation, dissolution or winding-up of our affairs.
If and when they are reinstated, we may not be able to continue to pay dividends on the Preferred Stock if we fall out of compliance with our loan covenants and are prohibited by our bank lender from paying dividends or if we have insufficient cash to make dividend payments.
The Company resumed paying monthly dividends in February 2025, paying one month of the arrearage. We may not be able to continue to pay dividends on the Preferred Stock if we fall out of compliance with our loan covenants and are prohibited by our bank lender from paying dividends or if we have insufficient cash to make dividend payments.
If we are found to be in violation of the FCA, AKS, ACA, or any other applicable state or any federal fraud and abuse laws, whether by our current practices or for the past practices of a company we acquire, we may be subject to substantial civil damages and criminal penalties and fines that could have a material adverse impact on our business. 26 In addition, federal and state legislatures and agencies periodically consider proposals to revise aspects of the healthcare industry or to revise or create additional statutory and regulatory requirements.
If we are found to be in violation of the FCA, AKS, ACA, or any other applicable state or any federal fraud and abuse laws, whether by our current practices or for the past practices of a company we acquire, we may be subject to substantial civil damages and criminal penalties and fines that could have a material adverse impact on our business.
These events likely will result in loss of revenue. A prolonged interruption in the availability or reduction in the speed or other functionality of our websites and mobile applications could materially harm our business.
A prolonged interruption in the availability or reduction in the speed or other functionality of our websites and mobile applications could materially harm our business.
Our systems may experience service interruptions or degradation due to hardware and software defects or malfunctions, computer denial-of-service and other cyberattacks, human error, earthquakes, hurricanes, floods, fires, natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks, computer viruses, or other events. Our systems are also subject to break-ins, sabotage and intentional acts of vandalism.
Our systems may experience service interruptions or degradation due to hardware and software defects or malfunctions, computer denial-of-service and other cyberattacks, human error, earthquakes, hurricanes, floods, fires, natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, such as the conflicts in Ukraine and the Middle East, terrorist attacks, computer viruses, or other events.
Further, HITECH empowered state attorneys’ general to enforce HIPAA. 27 The HITECH Act heightened enforcement of privacy and security rules, indicating that the imposition of penalties will be more common in the future and such penalties will be more severe.
The HITECH Act heightened enforcement of privacy and security rules, indicating that the imposition of penalties will be more common in the future and such penalties will be more severe.
This control could have the effect of delaying or preventing a change of control of our company or changes in management, and will make the approval of certain transactions difficult or impossible without his support, which in turn could reduce the price of our common stock.
This control could have the effect of delaying or preventing a change of control of our company or changes in management and will make the approval of certain transactions difficult or impossible without his support, which in turn could reduce the price of our common stock. 33 Provisions of Delaware law, of our amended and restated charter and amended and restated bylaws may make a takeover more difficult, which could cause our common stock price to decline.
Holders of the Preferred Stock may be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “qualified dividend income”.
Thus, higher market interest rates could cause the market price of the Preferred Stock to materially decrease. 36 Holders of the Preferred Stock may be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “qualified dividend income”.
See Note 3, Goodwill and Intangible Assets - Net , to our consolidated financial statements in this Annual Report on Form 10-K for more details. We are a party to several related-party agreements with our founder and Executive Chairman, Mahmud Haq, which have significant contractual obligations. These agreements are reviewed by our Audit Committee on an annual basis.
For the year ended December 31, 2024, no additional goodwill impairment was recorded. See Note 3, Goodwill and Intangible Assets - Net , to our consolidated financial statements in this Annual Report on Form 10-K for more details. We are a party to several related-party agreements with our founder and Executive Chairman, Mahmud Haq, which have significant contractual obligations.
Finally, we may be required to spend significant resources to monitor and protect our intellectual property rights, including with respect to legal proceedings, which could result in substantial costs and diversion of resources and could materially and adversely impact our business, financial condition and operating results.
Finally, we may be required to spend significant resources to monitor and protect our intellectual property rights, including with respect to legal proceedings, which could result in substantial costs and diversion of resources and could materially and adversely impact our business, financial condition and operating results. 21 Claims by others that we infringe or may infringe on their intellectual property could force us to incur significant costs or revise the way we conduct our business.
Voting rights for holders of the Preferred Stock exist primarily with respect to the ability to elect, voting together with the holders of any other series of our preferred stock having similar voting rights, two additional directors to our Board of Directors, subject to limitations, in the event that eighteen monthly dividends (whether or not consecutive) payable on the Preferred Stock are in arrears, and with respect to voting on amendments to our articles of incorporation or articles of amendment relating to the Preferred Stock that materially and adversely affect the rights of the holders of Preferred Stock or authorize, increase or create additional classes or series of our capital stock that are senior to the Preferred Stock.
This control could have the effect of delaying or preventing a change of control of our Company or changes in management, and will make the approval of certain transactions difficult or impossible without his support, which in turn could reduce the price of our Preferred Stock. 37 Voting rights for holders of the Preferred Stock exist primarily with respect to the ability to elect, voting together with the holders of any other series of our preferred stock having similar voting rights, two additional directors to our Board of Directors, subject to limitations, in the event that eighteen monthly dividends (whether or not consecutive) payable on the Preferred Stock are in arrears, and with respect to voting on amendments to our articles of incorporation or articles of amendment relating to the Preferred Stock that materially and adversely affect the rights of the holders of Preferred Stock or authorize, increase or create additional classes or series of our capital stock that are senior to the Preferred Stock.
Any such downward revision, placing it on a watch list or withdrawal of a rating could have an adverse effect on the market price of the Preferred Stock. We may redeem the Series A and Series B Preferred Stock at any time.
Any such downward revision, placing it on a watch list or withdrawal of a rating could have an adverse effect on the market price of the Preferred Stock. The market price of our Series B Preferred Stock is variable and is substantially affected by various factors.
We cannot assure you that material performance problems or defects in our products or services will not arise in the future. Errors may result from receipt, entry, or interpretation of patient information or from interface of our services with legacy systems and data that we did not develop and the function of which is outside of our control.
Errors may result from receipt, entry, or interpretation of patient information or from interface of our services with legacy systems and data that we did not develop and the function of which is outside of our control. Despite testing, defects or errors may arise in our existing or new software or service processes.
Our web-based EHR solutions have been certified as complete EHR systems by ICSA Labs or Drummond Group, non-governmental, independent certifying bodies. We must ensure that our EHR solutions continue to be certified according to applicable HITECH Act and Cures Act technical standards so that our customers qualify for any MIPS/MACRA incentive payments and are not subject to penalties for non-compliance.
We must ensure that our EHR solutions continue to be certified according to applicable HITECH Act and Cures Act technical standards so that our customers qualify for any MIPS/MACRA incentive payments and are not subject to penalties for non-compliance.
If we or our customers fail to comply with federal and state laws governing submission of false or fraudulent claims to government healthcare programs and financial relationships among healthcare providers, we or our customers may be subject to civil and criminal penalties or loss of eligibility to participate in government healthcare programs.
A breach of our safeguards and processes could expose us to civil penalties of up to $1.5 million for each incident and the possibility of civil litigation. 31 If we or our customers fail to comply with federal and state laws governing submission of false or fraudulent claims to government healthcare programs and financial relationships among healthcare providers, we or our customers may be subject to civil and criminal penalties or loss of eligibility to participate in government healthcare programs.
Haq exercises a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation, and approval of significant corporate transactions.
After the Conversion, he now owns approximately 12% of our outstanding common shares. Accordingly, Mr. Haq exercises a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation, and approval of significant corporate transactions.
Our inability to promptly and cost-effectively correct a product defect could result in the Company having to withdraw an important product from market, damage to our reputation, and result in material costs and expenses, any of which could have a material impact on our revenue, margins, and operating results. 20 Moreover, information services as complex as those we offer have in the past contained, and may in the future develop or contain, undetected defects or errors.
Our inability to promptly and cost-effectively correct a product defect could result in the Company having to withdraw an important product from market, damage to our reputation, and result in material costs and expenses, any of which could have a material impact on our revenue, margins, and operating results.
Systems failures or cyberattacks and resulting interruptions in the availability of or degradation in the performance of our websites, applications, products or services could harm our business. As cybersecurity attacks continue to evolve and increase, our information systems could also be penetrated or compromised by internal and external parties’ intent on extracting confidential information, disrupting business processes or corrupting information.
As cybersecurity attacks continue to evolve and increase, our information systems could also be penetrated or compromised by internal and external parties’ intent on extracting confidential information, disrupting business processes or corrupting information.
As a result of the annual goodwill impairment test, we recorded impairment charges of approximately $2 million. Indicators that are considered include significant changes in performance relative to expected operating results, significant negative industry or economic trends, or a significant decline in our stock price and/or market capitalization or enterprise value for a sustained period of time.
Indicators that were considered included significant changes in performance relative to expected operating results, significant negative industry or economic trends, or a significant decline in our stock price and/or market capitalization or enterprise value for a sustained period of time.
Risks Related to Ownership of Shares of Our Common Stock Our revenues, operating results and cash flows may fluctuate in future periods and we may fail to meet investor expectations, which may cause the price of our common stock to decline.
Our revenues, operating results and cash flows may fluctuate in future periods and we may fail to meet investor expectations, which may cause the price of our common stock to decline. Variations in our quarterly and year-end operating results are difficult to predict and may fluctuate significantly from period to period.
As a public company, the Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly.
Complying with the laws and regulations affecting public companies will increase our costs and the demands on management and could harm our operating results. As a public company, the Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly.
Our Board of Directors may exercise its authority with respect to the remaining shares of preferred stock without any further approval of common stockholders. The rights of the holders of common stock may be adversely affected by the rights of future holders of preferred stock. We do not intend to pay cash dividends on our common stock.
After the Conversion, there were 984,530 shares of Series A Preferred Stock outstanding. Our Board of Directors may exercise its authority with respect to the remaining shares of preferred stock without any further approval of common stockholders. The rights of the holders of common stock may be adversely affected by the rights of future holders of preferred stock.
If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on internal control from our independent registered public accounting firm.
If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on internal control from our independent registered public accounting firm. 34 We are a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.
Some of our systems are not fully redundant and our disaster recovery planning is not sufficient for all eventualities. We have experienced and will likely continue to experience system failures, denial of service attacks and other events or conditions from time to time that interrupt the availability or reduce the speed or functionality of our websites and mobile applications.
We have experienced and will likely continue to experience system failures, denial of service attacks and other events or conditions from time to time that interrupt the availability or reduce the speed or functionality of our websites and mobile applications. These events likely will result in loss of revenue.
Even following implementation, there can be no assurance that we will recognize revenue on a timely basis or at all from our efforts.
During the implementation cycle, we expend substantial time, effort, and financial resources implementing our services without recognizing revenue. Even following implementation, there can be no assurance that we will recognize revenue on a timely basis or at all from our efforts.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We cannot predict if investors will find our common stock less attractive because we will rely on the exemption available to smaller reporting companies. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.
In addition, we could become subject to investigations by Nasdaq, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business. We may not be able to negotiate a credit facility at reasonable terms as the current credit facility expires in October 2025.
We have not conducted an independent review of patents and other intellectual property issued to third parties, who may have patents or patent applications relating to our proprietary technology. We may receive letters from third parties alleging, or inquiring about, possible infringement, misappropriation or violation of their intellectual property rights.
Our competitors protect their proprietary rights by means of patents, trade secrets, copyrights, trademarks and other intellectual property. We have not conducted an independent review of patents and other intellectual property issued to third parties, who may have patents or patent applications relating to our proprietary technology.
While we remain committed to efficient exchange of information in the healthcare industry and continue meeting all new certification requirements, failure to comply with these regulatory requirements, could create liability for us, result in adverse publicity and negatively affect our business.
While we remain committed to efficient exchange of information in the healthcare industry and continue meeting all new certification requirements, failure to comply with these regulatory requirements, could create liability for us, result in adverse publicity and negatively affect our business. 29 The Office of Inspector General (“OIG”) of the Department of Health and Human Services (“HHS”) has a longstanding concern that percentage-based billing arrangements may increase the risk of improper billing practices.
Currently, we do not anticipate paying any cash dividends to holders of our common stock. As a result, capital appreciation, if any, of our common stock will be a stockholder’s sole source of gain. Complying with the laws and regulations affecting public companies will increase our costs and the demands on management and could harm our operating results.
We do not intend to pay cash dividends on our common stock. Currently, we do not anticipate paying any cash dividends to holders of our common stock. As a result, capital appreciation, if any, of our common stock will be a stockholder’s sole source of gain.
Any party asserting that we infringe, misappropriate or violate proprietary rights may force us to defend ourselves, and potentially our customers, against the alleged claim. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and/or invalidation of our proprietary rights or interruption or cessation of our operations.
These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and/or invalidation of our proprietary rights or interruption or cessation of our operations.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell substantial amounts of our common stock in the public market, the market price of our common stock could decline significantly.
Future sales of shares of our common stock could depress the market price of our common stock. Sales of a substantial number of shares of our common stock in the public market could occur at any time.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeItem 1C. Cybersecurity Cybersecurity Risk Management and Strategy We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K.
Biggest changeItem 1C. Cybersecurity Cybersecurity Risk Management and Strategy We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats, as such term is defined in Item 106(a) of Regulation S-K. These risks include internal and external threats, data loss, phishing attacks, distributed denial of service attacks, third party risks, unpatched systems, weak authentications and zero-day vulnerabilities.
Members of the Cybersecurity subcommittee receive updates on a quarterly basis from senior management, including leaders from our Information Security, Finance, Internal Audit, Compliance and Legal teams regarding matters of cybersecurity.
Members of the Cybersecurity subcommittee receive updates on a quarterly basis from senior management, including leaders from our Information Security, Finance, Internal Audit, Compliance and Legal teams regarding cybersecurity matters.
These individuals are informed about, and monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan, and report to the Cybersecurity subcommittee on any appropriate items. 35
These individuals are informed about, and monitor the prevention, mitigation, detection and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan, and report to the Cybersecurity subcommittee on any appropriate items.
As of the date of this Form 10-K, we have not experienced a cybersecurity threat or incident that resulted in a material adverse impact to our business or operations. We also conduct exercises to simulate responses to cybersecurity incidents.
As of the date of this Form 10-K, we have not experienced a cybersecurity threat or incident that resulted in a material adverse impact to our business or operations. 38 We also conduct exercises to simulate responses to cybersecurity incidents.
This includes existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents, (if any), and status on key information security initiatives. Our cybersecurity risk management and strategy processes are overseen by leaders from our Information Technology department.
This includes existing and new cybersecurity risks, status on how management is addressing and/or mitigating those risks, cybersecurity and data privacy incidents, (if any), and the status on key information security initiatives. Our cybersecurity risk management and strategy processes are overseen by our Vice President of IT Infrastructure and leaders from our Information Technology department.
Cybersecurity risks related to our business, technical operations, privacy and compliance issues are identified and addressed through a multi-faceted approach including third party assessments, internal IT Audit, IT security, governance, risk and compliance reviews.
Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes. Cybersecurity risks related to our business, technical operations, privacy and compliance issues are identified and addressed through a multi-faceted approach including third party assessments, internal IT Audit, IT security, governance, risk and compliance reviews.
For 2023, our Information Security Management System is compliant with ISO 27001. We also had a SOC 2, Type 2 review performed for the year 2023.
For 2024 and 2023, our Information Security Management System is compliant with ISO 27001. We also had SOC 2, Type 2 reviews performed for the years 2024 and 2023.
Removed
These risks include internal and external threats, data loss, phishing attacks, distributed denial of service attacks, third party risks, unpatched systems, weak authentications and zero-day vulnerabilities. 34 Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe lease approximately 14,000 square feet of land in Islamabad, Pakistan, where we constructed modular buildings used for office space and computer server facilities for three years expiring on September 30, 2024, with the first two years under a non-cancellable lease.
Biggest changeWe also lease approximately 40,000 square feet for five pediatric offices in the Midwest, with leases that will expire between December 2025 and April 2036. We lease approximately 14,000 square feet of land in Islamabad, Pakistan, where we constructed modular buildings used for office space and computer server facilities for two years expiring on September 30, 2026.
We believe our current facilities are adequate for our current needs and that suitable additional space will be available as and when needed.
We believe our current facilities are adequate for our current needs and that suitable additional space will be available as and when needed. 39
Item 2. Properties Our corporate headquarters are located at 7 Clyde Road, Somerset, New Jersey 08873 where we occupy approximately 2,400 square feet of space under a month-to-month lease. Additionally, at December 31, 2023 we lease approximately 73,000 square feet of office space in 15 locations throughout the U.S., with lease terms that are typically five years or less.
Item 2. Properties Our corporate headquarters are located at 7 Clyde Road, Somerset, New Jersey 08873 where we occupy approximately 2,400 square feet of space under a month-to-month lease. Additionally, at December 31, 2024 we lease approximately 42,000 square feet of office space in 13 locations throughout the U.S., with lease terms that are typically five years or less.
The Company also leases a total of approximately 255,000 square feet of office space in Bagh and Karachi, Pakistan, and in Sri Lanka. The lease in Sri Lanka expires in March 2024 and we intend to renew it for an additional year at expiration.
The Company also leases a total of approximately 251,000 square feet of office space in Pakistan and in Sri Lanka. The lease in Sri Lanka expires in March 2025 and we intend to renew it for an additional year at expiration.
Removed
We also lease approximately 40,000 square feet for five pediatric offices in the Midwest, with leases that will expire between December 2025 and April 2036.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+4 added−1 removed2 unchanged
Biggest changeThe payment for such an award was made during the first quarter of 2024. The deadline for Ramapo to file a summary action in New Jersey seeking to overturn the arbitrator’s decision is April 20, 2024. The Company’s portion of the settlement is approximately $32,000 and our insurance will pay the balance.
Biggest changeThe payment for such an award was made during the first quarter of 2024. The Company’s portion of the settlement was approximately $32,000 and the insurance company paid the balance. The Company’s portion was recorded in accrued expenses at December 31, 2023 in the consolidated balance sheet.
Including the proceeding described above, we are not presently a party to any legal proceedings that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, consolidated results of operations, financial position or cash flows of the Company.
Including the proceedings described above, we are not presently a party to any legal proceedings that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, consolidated results of operations, financial position or cash flows of the Company.
Removed
The Company’s portion has been recorded in accrued expenses in the December 31, 2023 consolidated balance sheet. From time to time, we may become involved in other legal proceedings arising in the ordinary course of our business.
Added
A former customer filed a complaint against the Company in New Jersey State Court to recover damages claimed to have been caused by the mishandling of their account. Plaintiff alleged at least approximately $750,000 in damages which was disputed by the Company. The parties participated in a one-day court-ordered, non-binding arbitration.
Added
At that time, the arbitrator awarded Plaintiff $288,750 on its contract claims, and awarded the Company $21,698 on its cross-claim for unpaid fees. Plaintiff filed to reject this award.
Added
The Company previously filed a partial motion for summary judgment on the alleged punitive damages, but the court denied that motion finding there is an issue of fact as to whether those can be awarded at trial. The Company filed an offer of judgment for $200,000 during April 2024 which was accepted and paid in July 2024.
Added
In connection with a prior acquisition, the seller had alleged that the Company owed approximately $800,000 in transition related costs to them. The parties agreed to settle the claim for approximately $316,000, which was paid in September 2024. From time to time, we may become involved in other legal proceedings arising in the ordinary course of our business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSecurities Authorized for Issuance under the Equity Compensation Plan As of December 31, 2023, the following table shows the number of securities to be issued upon vesting under the equity compensation plan approved by the Company’s Board of Directors.
Biggest changePurchases of Equity Securities by the Issuer and Affiliated Purchasers There was no share repurchase activity during the three months ended December 31, 2024. 40 Securities Authorized for Issuance under the Equity Compensation Plan As of December 31, 2024, the following table shows the number of securities to be issued upon vesting under the equity compensation plan approved by the Company’s Board of Directors.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock has been listed since July 23, 2014 and is trading on the Nasdaq Global Market under the symbol “CCLD”. Common Stockholders As of December 31, 2023, there were approximately 6,800 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock has been listed since July 23, 2014 and is trading on the Nasdaq Global Market under the symbol “CCLD”. Common Stockholders As of December 31, 2024, there were approximately 7,800 holders of record of our common stock.
The Company is prohibited from paying any dividends on common stock without the prior written consent of its senior lender, SVB. 36 Sales of Unregistered Securities There were no sales of unregistered equity securities during the year ended December 31, 2023.
The Company is prohibited from paying any dividends on common stock without the prior written consent of its senior lender, SVB. Sales of Unregistered Securities There were no sales of unregistered equity securities during the year ended December 31, 2024.
Equity Compensation Plan Information Plan Category Number of securities to be issued upon vesting Number of securities remaining available for future issuance under equity incentive plan (excluding securities to be issued upon vesting) Equity compensation plan approved by security holders - common shares 753,495 493,579 Equity compensation plan approved by security holders - preferred shares 57,199 71,769 Total 810,694 565,348 Item 6. [Reserved]
Equity Compensation Plan Information Plan Category Number of securities to be issued upon vesting Number of securities remaining available for future issuance under equity incentive plan (excluding securities to be issued upon vesting) Equity compensation plan approved by security holders - common shares 242,500 499,683 Equity compensation plan approved by security holders - preferred shares 19,199 49,769 Total 261,699 549,452 Item 6. [Reserved]
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers There was no share repurchase activity during the three months ended December 31, 2023.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 53 Item 8. Financial Statements and Supplementary Data 53 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 53 Item 9A. Controls and Procedures 53 Item 9B.
Biggest changeItem 6. [Reserved] 41 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 41 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 55 Item 8. Financial Statements and Supplementary Data 55 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 55 Item 9A. Controls and Procedures 56 Item 9B.
Added
Other Information 57 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 57 PART III 57 Item 10. Directors, Executive Officers and Corporate Governance 57 Item 11. Executive Compensation 57 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 57 Item 13. Certain Relationships and Related Transactions, and Director Independence 57 Item 14.
Added
Principal Accountant Fees and Services 57 PART IV 58 Item 15.
Added
Exhibits and Financial Statement Schedules 58 Signatures 64 2 Forward-Looking Statements Certain statements that we make from time to time, including statements contained in this Annual Report on Form 10-K, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.
Added
All statements other than statements of historical fact contained in this Annual Report on Form 10-K are forward-looking statements. These statements relate to anticipated future events, future results of operations or future financial performance.
Added
In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “shall,” “should,” “could,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “seeks,” “estimates,” “forecasts,” “predicts,” “possible,” “potential,” “target,” or “continue” or the negative of these terms or other comparable terminology.
Added
Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct.
Added
Forward-looking statements in this Annual Report on Form 10-K include, without limitation, statements reflecting management’s expectations for future financial performance and operating expenditures (including our ability to continue as a going concern, to raise additional capital and to succeed in our future operations), expected growth, profitability and business outlook, increased sales and marketing expenses, and the expected results from the integration of our acquisitions.
Added
Forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties, and other factors that may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements.
Added
These factors include, among other things, the unknown risks and uncertainties that we believe could cause actual results to differ from these forward-looking statements as set forth under the heading, “Risk Factors” and elsewhere in this Annual Report on Form 10-K .
Added
New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements, including without limitation, risks and uncertainties relating to: ● our ability to manage our growth, including acquiring, partnering with, and effectively integrating acquired businesses into our infrastructure and avoiding legal exposure and liabilities associated with acquired companies and assets; ● our ability to retain our clients and revenue levels, including effectively migrating new clients and maintaining or growing the revenue levels of our new and existing clients; ● our ability to maintain operations in Pakistan, Azad Jammu and Kashmir, and Sri Lanka (together, the “Offshore Offices”) in a manner that continues to enable us to offer competitively priced products and services; ● our ability to keep pace with a rapidly changing healthcare industry; ● our ability to consistently achieve and maintain compliance with a myriad of federal, state, foreign, local, payor and industry requirements, regulations, rules, laws and contracts; ● our ability to maintain and protect the privacy of confidential and protected Company, client and patient information; ● our ability to develop new technologies, upgrade and adapt legacy and acquired technologies to work with evolving industry standards and third-party software platforms and technologies, and protect and enforce all of these and other intellectual property rights; ● our ability to attract and retain key officers and employees, and the continued involvement of Mahmud Haq as Executive Chairman and A.
Added
Hadi Chaudhry and Stephen Snyder as Co-Chief Executive Officers, all of which are critical to our ongoing operations and growing our business; 3 ● our ability to realize the expected cost savings and benefits from our restructuring activities and structural cost reductions; ● our ability to comply with covenants contained in our credit agreement with our senior secured lender, Silicon Valley Bank, a division of First Citizens Bank, and other future debt facilities; ● our ability to continue to pay our monthly dividends which were suspended in December 2023 and resumed in February 2025 to the holders of our Series A and Series B preferred stock; ● our ability to incorporate AI into our products faster and more successfully than our competitors, protecting the privacy of medical records and cybersecurity threats; ● our ability to compete with other companies developing products and selling services competitive with ours, and who may have greater resources and name recognition than we have; ● our ability to effectively integrate, manage and keep our information systems secure and operational in the event of a cyber-attack; ● our ability to respond to the uncertainty resulting from pandemics, epidemics or other public health emergencies and the impact they may have on our operations, the demand for our services, our projected results of operations, financial performance or other financial metrics or any of the foregoing risks and economic activity in general; ● our ability to keep and increase market acceptance of our products and services; ● changes in domestic and foreign business, market, financial, political and legal conditions; and ● other factors disclosed in this Annual Report on Form 10-K or our other filings with the Securities and Exchange Commission (the “ SEC”).
Added
Although we believe that the expectations reflected in the forward-looking statements contained in this Annual Report on Form 10-K are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.
Added
You should read this Annual Report on Form 10-K with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we currently expect.
Added
Except as required by law, we are under no duty to update or revise any of such forward-looking statements, whether as a result of new information, future events, or otherwise, after the date of this Annual Report on Form 10-K.
Added
Summary of Risk Factors The following is a summary of the principal risks and uncertainties that could materially adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor contained in “Risk Factors” in Part 1, Item 1A below.
Added
Risks Related to our Business ● We operate in a highly competitive industry, and our competitors may be able to compete more efficiently or evolve more rapidly than we do, which could have a material adverse effect on our business, revenue, growth rates and market share. ● If we are unable to successfully introduce new products or services or fail to keep pace with advances in technology, we would not be able to maintain our customers or grow our business, which will have a material adverse effect on our business. ● The continued success of our business model is heavily dependent upon our offshore operations, and any disruption to those operations will adversely affect us. ● Our offshore operations expose us to additional business and financial risks which could adversely affect us and subject us to civil and criminal liability. ● We may be adversely affected by global climate change or market responses to such change. ● Changes in the healthcare industry could affect the demand for our services and may result in a decrease in our revenues and market share. ● If providers do not purchase our products and services or delay in choosing our products or services, we may not be able to grow our business. ● If the revenues of our customers decrease, or if our customers cancel or elect not to renew their contracts, our revenue will decrease. ● As a result of our variable sales and implementation cycles, we may be unable to recognize revenue from prospective customers on a timely basis and we may not be able to offset expenditures. ● We are required to collect sales and use taxes on certain products and services we sell in certain jurisdictions.
Added
We may be subject to liability for past sales and incur additional related costs and expenses, and our future sales may decrease. ● If we lose the services of Mahmud Haq as Executive Chairman, A.
Added
Hadi Chaudhry and Stephen Snyder as Co-Chief Executive Officers, or other members of our management team, or if we are unable to attract, hire, integrate and retain other necessary employees, our business would be harmed. ● We may be unable to adequately establish, protect or enforce our patents, trade secrets and other intellectual property rights and we may incur significant costs in enforcing our intellectual property rights. 4 ● Claims by others that we infringe or may infringe on their intellectual property could force us to incur significant costs or revise the way we conduct our business. ● Current and future litigation against us could be costly and time-consuming to defend and could result in additional liabilities. ● Our proprietary software or service delivery platform may not operate properly, which could damage our reputation, give rise to claims against us, or divert application of our resources from other purposes, any of which could harm our business and operating results. ● If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities. ● Our products and services are required to meet the interoperability standards, which could require us to incur substantial additional development costs or result in a decrease in revenue. ● Disruptions in internet or telecommunication service or damage to our data centers could adversely affect our business by reducing our customers’ confidence in the reliability of our services and products. ● We may be subject to liability for the content we provide to our customers and their patients. ● We are subject to the effects of payer and provider conduct that we cannot control and that could damage our reputation with customers and result in liability claims that increase our expenses. ● Failure by our clients to obtain proper permissions and waivers may result in claims against us or may limit or prevent our use of data, which could harm our business. ● Any deficiencies in our financial reporting or internal controls could adversely affect our business and the trading price of our securities. ● We may not be able to negotiate a credit facility at reasonable terms as the current credit facility expires in October 2025. ● We maintain our cash at financial institutions often in balances that exceed federally insured limits. ● Our goodwill was subject to impairment in 2023 and may be subject to further impairment in the future, which could have a material adverse effect on our results of operations, financial condition, or future operating results. ● We are a party to several related-party agreements with our founder and Executive Chairman, Mahmud Haq, which have significant contractual obligations.
Added
These agreements are reviewed by our Audit Committee on an annual basis. ● We depend on key information systems and third-party service providers. ● Systems failures, cyberattacks or other events and resulting interruptions in the availability of or degradation in the performance of our websites, applications, products or services could harm our business. ● Data privacy, identity protection and information security compliance may require significant resources and present certain risks. ● We use artificial intelligence in our business, and challenges with properly managing its use could result in reputational and competitive harm, legal liability, and adversely affect our results of operations. ● Rapid technological change in the telehealth industry presents us with significant risks and challenges. ● Our business, financial condition, results of operations and growth may be adversely affected by pandemics, epidemics or other public health emergencies, such as COVID-19. 5 Risks Related to Macroeconomics Conditions ● Our operations and performance depend significantly on global and regional economic conditions and adverse economic conditions can materially adversely affect our business, results of operations and financial condition. ● Our managed medical practices and customers could face supply chain issues that would disrupt their ability to service patients and therefore, impact our revenue. ● Volatility in currency exchange rates may adversely affect our financial condition, results of operations and cash flows.
Added
Risks Related to Our Acquisition Strategy ● At the current prices of our common and Preferred Stock, we may be unable to execute accretive acquisitions. ● We may be unable to retain customers following their acquisition, which may result in a decrease in our revenues and operating results. ● Acquisitions may subject us to liability with regard to the creditors, customers, and shareholders of the sellers. ● Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of indebtedness and increased amortization expense.
Added
Regulatory Risks ● The healthcare industry is heavily regulated.
Added
Our failure to comply with regulatory requirements could create liability for us, result in adverse publicity and negatively affect our business. ● If we do not maintain the certification of our EHR solutions pursuant to the HITECH Act and Cures Act, our business, financial condition and results of operations will be adversely affected. ● If a breach of our measures protecting personal data covered by HIPAA or the HITECH Act occurs, we may incur significant liabilities. ● If we or our customers fail to comply with federal and state laws governing submission of false or fraudulent claims to government healthcare programs and financial relationships among healthcare providers, we or our customers may be subject to civil and criminal penalties or loss of eligibility to participate in government healthcare programs. ● Potential healthcare reform and new regulatory requirements placed on our products and services could increase our costs, delay or prevent our introduction of new products or services, and impair the function or value of our existing products and services. ● Additional regulation of the disclosure of medical information outside the United States may adversely affect our operations and may increase our costs. ● Our services present the potential for embezzlement, identity theft, or other similar illegal behavior by our employees.
Added
Risks Related to Ownership of Shares of Our Common Stock ● The conversion of the Series A Preferred Stock into common stock in March 2025 (the “Conversion”) increased the total number of outstanding shares, potentially diluting the value of existing common shareholders’ equity. ● Series A Preferred Stock shareholders gained full voting rights upon conversion of their preferred shares into common stock. ● The conversion of the Series A Preferred Stock could be perceived negatively by the market. ● The Company’s potential for future issuances of common stock following the conversion could be limited. ● Our revenues, operating results and cash flows may fluctuate in future periods and we may fail to meet investor expectations, which may cause the price of our common stock to decline. ● Healthcare reform may have a material adverse effect on the Company’s financial condition and results of operations. ● Future sales of shares of our common stock could depress the market price of our common stock. ● As of December 31, 2024, Mahmud Haq controlled 31% of our outstanding shares of common stock, which prevented investors from influencing significant corporate decisions. ● Provisions of Delaware law, of our amended and restated charter and amended and restated bylaws may make a takeover more difficult, which could cause our common stock price to decline. 6 ● Any issuance of additional preferred stock in the future may dilute the rights of our existing stockholders. ● We do not intend to pay cash dividends on our common stock. ● Complying with the laws and regulations affecting public companies will increase our costs and the demands on management and could harm our operating results. ● We are a smaller reporting company and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies will make our common stock less attractive to investors.
Added
Risks Related to Ownership of Shares of Our Preferred Stock ● As a result of the Conversion, there may not be an organized trading market for the Series A Preferred Stock. ● In December 2023 we suspended the payment of the dividends on the Preferred Stock.
Added
The Company resumed paying monthly dividends in February 2025, paying one month of the arrearage.
Added
We may not be able to continue to pay dividends on the Preferred Stock if we fall out of compliance with our loan covenants and are prohibited by our bank lender from paying dividends or if we have insufficient cash to make dividend payments. ● Our Series A and Series B Preferred Stock rank junior to all of our indebtedness and other liabilities. ● We may issue additional shares of Preferred Stock and additional series of preferred stock that rank on parity with the Preferred Stock as to dividend rights, rights upon liquidation or voting rights. ● Market interest rates may materially and adversely affect the value of the Preferred Stock. ● Holders of the Preferred Stock may be unable to use the dividends-received deduction and may not be eligible for the preferential tax rates applicable to “qualified dividend income”. ● Our Preferred Stock has not been rated. ● The market price of our Series B Preferred Stock is variable and is substantially affected by various factors. ● A holder of Preferred Stock has extremely limited voting rights. ● The Preferred Stock is not convertible at the option of the holder and investors will not realize a corresponding upside if the price of the common stock increases. ● Although payment of the suspended dividends resumed in February 2025, there are still dividends in arrears and we may be unable to raise additional capital without incurring excessive dilution. 7 PART I

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

91 edited+7 added−23 removed46 unchanged
Biggest changeYears Ended December 31, 2023 2022 2021 2020 2019 ($ in thousands) Adjusted EBITDA $ 15,429 $ 22,248 $ 22,119 $ 10,871 $ 8,101 Quarterly Results of Operations December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2023 2023 2023 2023 2022 2022 2022 2022 ($ in thousands, except per share data) Net revenue $ 28,416 $ 29,280 $ 29,362 $ 30,001 $ 32,534 $ 33,723 $ 37,228 $ 35,341 Operating expenses: Direct operating costs 16,974 18,260 17,476 18,107 19,568 20,406 21,787 22,673 Selling and marketing 2,121 2,337 2,580 2,612 2,474 2,504 2,426 2,384 General and administrative 4,946 5,482 5,916 5,120 5,341 6,500 6,394 5,585 Research and development 1,213 1,260 1,185 1,078 1,150 1,168 1,098 985 Change in contingent consideration - - - - (200 ) (1,660 ) (630 ) (600 ) Depreciation and amortization 4,120 3,903 3,341 3,038 3,039 2,810 2,936 2,940 Goodwill impairment charges 42,000 - - - - - - - Net loss on lease terminations, unoccupied lease charges and restructuring costs 675 8 153 269 210 307 463 158 Total operating expenses 72,049 31,250 30,651 30,224 31,582 32,035 34,474 34,125 Operating (loss) income (43,633 ) (1,970 ) (1,289 ) (223 ) 952 1,688 2,754 1,216 Interest expense - net (335 ) (300 ) (275 ) (130 ) (83 ) (82 ) (104 ) (95 ) Other (expense) income - net (292 ) (422 ) (186 ) 17 (337 ) (495 ) 112 83 (Loss) income before (benefit) provision for income taxes (44,260 ) (2,692 ) (1,750 ) (336 ) 532 1,111 2,762 1,204 Income tax (benefit) provision (568 ) 57 82 65 33 55 25 64 Net (loss) income $ (43,692 ) $ (2,749 ) $ (1,832 ) $ (401 ) $ 499 $ 1,056 $ 2,737 $ 1,140 Preferred stock dividend 3,917 3,916 3,910 3,931 3,855 3,849 3,776 4,037 Net loss attributable to common shareholders $ (47,609 ) $ (6,665 ) $ (5,742 ) $ (4,332 ) $ (3,356 ) $ (2,793 ) $ (1,039 ) $ (2,897 ) Net loss per common share: Basic and diluted $ (3.04 ) $ (0.42 ) $ (0.37 ) $ (0.28 ) $ (0.22 ) $ (0.18 ) $ (0.07 ) $ (0.19 ) Adjusted EBITDA $ 4,128 $ 3,245 $ 3,819 $ 4,237 $ 5,684 $ 4,817 $ 7,017 $ 4,730 42 Reconciliation of net (loss) income to adjusted EBITDA The following table contains a reconciliation of net (loss) income to adjusted EBITDA by year.
Biggest changeYear Ended December 31, 2024 2023 2022 2021 2020 ($ in thousands) Adjusted EBITDA $ 24,057 $ 15,429 $ 22,248 $ 22,119 $ 10,871 45 Quarterly Results of Operations December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2024 2024 2024 2024 (1) 2023 2023 2023 2023 ($ in thousands, except per share data) Net revenue $ 28,239 $ 28,546 $ 28,090 $ 25,962 $ 28,416 $ 29,280 $ 29,362 $ 30,001 Operating expenses: Direct operating costs 15,003 15,420 15,242 15,177 16,974 18,260 17,476 18,107 Selling and marketing 1,423 1,375 1,664 1,770 2,121 2,337 2,580 2,612 General and administrative 3,996 4,378 4,028 3,721 4,946 5,482 5,916 5,120 Research and development 1,013 800 1,055 913 1,213 1,260 1,185 1,078 Depreciation and amortization 3,257 3,241 3,714 3,930 4,120 3,903 3,341 3,038 Goodwill impairment charges - - - - 42,000 - - - Lease terminations, unoccupied lease charges and restructuring costs 91 67 116 322 675 8 153 269 Total operating expenses 24,783 25,281 25,819 25,833 72,049 31,250 30,651 30,224 Operating income (loss) 3,456 3,265 2,271 129 (43,633 ) (1,970 ) (1,289 ) (223 ) Net interest expense (48 ) (162 ) (264 ) (338 ) (335 ) (300 ) (275 ) (130 ) Other (expense) income - net (71 ) 60 (294 ) 7 (292 ) (422 ) (186 ) 17 Income (loss) before provision (benefit) for income taxes 3,337 3,163 1,713 (202 ) (44,260 ) (2,692 ) (1,750 ) (336 ) Income tax provision (benefit) 41 41 39 39 (568 ) 57 82 65 Net income (loss) $ 3,296 $ 3,122 $ 1,674 $ (241 ) $ (43,692 ) $ (2,749 ) $ (1,832 ) $ (401 ) Preferred stock dividend 3,286 3,789 3,923 1,312 3,917 3,916 3,910 3,931 Net income (loss) attributable to common shareholders $ 10 $ (667 ) $ (2,249 ) $ (1,553 ) $ (47,609 ) $ (6,665 ) $ (5,742 ) $ (4,332 ) Net income (loss) per common share: Basic and diluted $ 0.00 $ (0.04 ) $ (0.14 ) $ (0.10 ) $ (3.04 ) $ (0.42 ) $ (0.37 ) $ (0.28 ) Adjusted EBITDA $ 7,141 $ 6,840 $ 6,389 $ 3,687 $ 4,128 $ 3,245 $ 3,819 $ 4,237 (1) The consolidated statement of operations for the three months ended March 31, 2024 has been restated to record the earned, but undeclared Preferred Stock dividend.
At a high level, these solutions can be categorized as follows: ● Technology-enabled business solutions, which are sometimes provided as individual offerings and often provided in combination with each other, including: ○ RCM services including end-to-end medical billing, eligibility, analytics, and related services, all of which can be provided utilizing our technology platform or through a third-party system; ○ AI tools are designed to serve as a digital healthcare assistant, helping to enhance clinical decision-making, streamline workflows, reduce administrative burdens, optimize revenue management, and promote patient-centered care; ○ EHRs, which are easy to use and sometimes integrated with our business services, and enable our healthcare provider clients to deliver better patient care, streamline their clinical workflows, decrease documentation errors and potentially qualify for government incentives; 37 ○ PM software and related capabilities, which support our clients’ day-to-day business operations and financial workflows, including automated insurance eligibility software, a robust billing and claims rules engine and other automated tools designed to maximize reimbursement; ○ PXM solutions designed to transform interactions between patients and their clinicians, including smartphone applications that assist patients and healthcare providers in the provision of healthcare services, including contactless digital check-in solutions, messaging and online appointment scheduling tools; ○ CareCloud Wellness, a digital health solution which includes chronic care management interactions with certified care managers, remote patient monitoring which feeds patient data directly to the EHR and highlights exceptions, and telehealth solutions which allow healthcare providers to conduct remote patient visits; ○ Business intelligence and healthcare analytics platforms that allow our clients to derive actionable insights from their vast amount of data; ○ Healthcare claims clearinghouse which enables our clients to electronically scrub and submit claims and process payments from insurance companies; ○ Interoperability and data transformation software to support the complex realities of data exchange with healthcare trading partners, including labs, insurance companies, and other healthcare IT vendors; ○ Customized applications, interfaces and a variety of other technology solutions that support our healthcare clients; ○ Professional services consisting of application and advisory services, revenue cycle services, data analytic services and educational training services; and ○ Workforce augmentation and on-demand staffing to support our clients as they expand their businesses, seek highly trained personnel, or struggle with staffing shortages. ● Medical practice management services are provided to medical practices.
At a high level, these solutions can be categorized as follows: ● Technology-enabled business solutions, which are sometimes provided as individual offerings and often provided in combination with each other, including: ○ RCM services including end-to-end medical billing, eligibility, analytics, and related services, all of which can be provided utilizing our technology platform or through a third-party system; ○ AI tools are 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; 41 ○ EHRs, which are easy to use and sometimes integrated with our business services, and enable our healthcare provider clients to deliver better patient care, streamline their clinical workflows, decrease documentation errors and potentially qualify for government incentives; ○ PM software and related capabilities, which support our clients’ day-to-day business operations and financial workflows, including automated insurance eligibility software, a robust billing and claims rules engine and other automated tools designed to maximize reimbursement; ○ PXM solutions designed to transform interactions between patients and their clinicians, including smartphone applications that assist patients and healthcare providers in the provision of healthcare services, including contactless digital check-in solutions, messaging and online appointment scheduling tools; ○ CareCloud Wellness, a digital health solution which includes chronic care management interactions with certified care managers, remote patient monitoring which feeds patient data directly to the EHR and highlights exceptions, and telehealth solutions which allow healthcare providers to conduct remote patient visits; ○ Business intelligence and healthcare analytics platforms that allow our clients to derive actionable insights from their vast amount of data; ○ Healthcare claims clearinghouse which enables our clients to electronically scrub and submit claims and process payments from insurance companies; ○ Interoperability and data transformation software to support the complex realities of data exchange with healthcare trading partners, including labs, insurance companies, and other healthcare IT vendors; ○ Customized applications, interfaces and a variety of other technology solutions that support our healthcare clients; ○ Professional services consisting of application and advisory services, revenue cycle services, data analytic services and educational training services; and ○ Workforce augmentation and on-demand staffing to support our clients as they expand their businesses, seek highly trained personnel, or struggle with staffing shortages. ● Medical practice management services are provided to medical practices.
Adjusted EBITDA excludes the following elements which are included in GAAP net (loss) income: ● Income tax (benefit) provision or the cash requirements to pay our taxes; 38 ● 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 expenses; ● Stock-based compensation expense, which includes cash-settled awards and the related taxes, based on changes in the stock price; ● Depreciation and amortization charges; ● Integration costs, such as severance amounts paid to employees from acquired businesses and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; ● Goodwill impairment charges; ● Net loss on lease terminations, unoccupied lease charges and restructuring costs; and ● Change in contingent consideration.
Adjusted EBITDA excludes the following elements which are included in GAAP net income (loss): ● Income tax provision (benefit) or the cash requirements to pay our taxes; ● Net interest expense or the cash requirements necessary to service interest on principal payments on our debt; ● Foreign currency gains and losses and other non-operating expenses; ● Stock-based compensation expense, which includes cash-settled awards and the related taxes, based on changes in the stock price; ● Depreciation and amortization charges; ● Integration costs, such as severance amounts paid to employees from acquired businesses and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; ● Goodwill impairment charges; ● Lease terminations, unoccupied lease charges and restructuring costs; and ● Change in contingent consideration.
The Company records the GILTI provisions as they are incurred each period. Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expense and related disclosures.
The Company records the GILTI provisions as they are incurred each period. 48 Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expense and related disclosures.
Changes in judgment on any of the above factors could materially impact the timing and amount of revenue recognized in a given period. 45 Revenue is recognized as the performance obligations are satisfied. We derive revenue from five primary sources: technology-enabled business solutions, professional services, printing and mailing services, group purchasing services and medical practice management services.
Changes in judgment on any of the above factors could materially impact the timing and amount of revenue recognized in a given period. Revenue is recognized as the performance obligations are satisfied. We derive revenue from five primary sources: technology-enabled business solutions, professional services, printing and mailing services, group purchasing services and medical practice management services.
Estimates to determine variable consideration such as payment to charge ratios, effective billing rates, and the estimated contractual payment periods are updated at each reporting date. Revenue is recognized over the performance period using the input method. Professional services: Revenues from professional services are recorded as the services are provided as the performance obligations are satisfied over time.
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. 49 Professional services: Revenues from professional services are recorded as the services are provided as the performance obligations are satisfied over time.
The increase was due to the redeployment of employees performing functions that were previously classified as direct operating costs to functions classified as research and development expense which was offset by a decrease in the U.S. headcount.
The decrease was due to a decrease in the U.S. headcount which was offset by the redeployment of employees performing functions that were previously classified as direct operating costs to functions classified as research and development expense.
Please see “ Forward-Looking Statements ” on page 2 of this Annual Report on Form 10-K. Overview The Company is a healthcare information technology company that provides technology-enabled business solutions and Software-as-a-Service offerings (“SaaS”), which are often bundled, but are occasionally provided individually, together with related business services to healthcare providers and hospitals throughout the United States.
Please see “ Forward-Looking Statements ” on page 3 of this Annual Report on Form 10-K. Overview The Company is a healthcare information technology company that provides technology-enabled business solutions and Software-as-a-Service offerings (“SaaS”), which are often bundled, but are occasionally provided individually, together with related business services to healthcare providers and hospitals throughout the United States.
Off-Balance Sheet Arrangements As of December 31, 2023, and 2022, 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.
Off-Balance Sheet Arrangements As of December 31, 2024, and 2023, 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.
Providers and Practices Served: As of December 31, 2023 and December 31, 2022, we provided services to approximately 40,000 providers (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services), representing approximately 2,600 practices.
Providers and Practices Served: As of December 31, 2024 and December 31, 2023, we provided services to approximately 40,000 providers (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services), representing approximately 2,600 practices.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of our consolidated financial condition and results of operations for the years ended December 31, 2023 and 2022 and other factors that are expected to affect our prospective financial condition.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following is a discussion of our consolidated financial condition and results of operations for the years ended December 31, 2024 and 2023 and other factors that are expected to affect our prospective financial condition.
General and administrative expense consists primarily of personnel-related expense for administrative employees, including compensation, benefits, travel, facility lease costs and insurance, software license fees and outside professional fees. Our Offshore Offices accounted for approximately 17% and 23% of general and administrative expenses for the years ended December 31, 2023 and 2022, respectively. Research and Development Expense.
General and administrative expense consists primarily of personnel-related expense for administrative employees, including compensation, benefits, travel, facility lease costs and insurance, software license fees and outside professional fees. Our Offshore Offices accounted for approximately 22% and 17% of general and administrative expenses for the years ended December 31, 2024 and 2023, respectively. Research and Development Expense.
We earned approximately 11% and 10% of our revenue from medical practice management services during the years ended December 31, 2023 and 2022, 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.
We earned approximately 13% and 11% of our revenue from medical practice management services during the years ended December 31, 2024 and 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. Operating Expenses Direct Operating Costs.
There was a $9.5 million decrease in project-based professional services revenue for the year ended December 31, 2023 as compared to 2022. The 2023 technology-enabled business solutions revenue was negatively impacted by two large accounts that had each been previously acquired prior to our beginning to serve them after a 2020 acquisition.
There was a $4.8 million decrease in project-based professional services revenue for the year ended December 31, 2024 as compared to 2023. The 2024 technology-enabled business solutions revenue was negatively impacted by two large accounts that had each been previously acquired prior to our beginning to serve them after a 2020 acquisition.
The reported amounts of direct operating costs do not include depreciation and amortization, which are broken out separately in the consolidated statements of operations. Operations in our Offshore Offices together accounted for approximately 11% of direct operating costs for both the years ended December 31, 2023 and 2022.
The reported amounts of direct operating costs do not include depreciation and amortization, which are broken out separately in the consolidated statements of operations. Operations in our Offshore Offices together accounted for approximately 13% and 11% of direct operating costs for the years ended December 31, 2024 and 2023, respectively.
Out of the total federal NOL carry forward, approximately $238 million is from the CareCloud and Meridian acquisitions and is subject to the federal Section 382 NOL annual usage limitations. The Company has state NOL carry forwards of approximately $199 million, of which $86 million relates to the State of New Jersey. These NOLs expire starting in 2025.
Out of the total federal NOL carry forward, approximately $237 million is from the CareCloud and Meridian acquisitions and is subject to the federal Section 382 NOL annual usage limitations. The Company has state NOL carry forwards of approximately $211 million, of which $84 million relates to the State of New Jersey. These NOLs expire starting in 2025.
There was a triggering event at August 31, 2023, but it was determined that there was no impairment. Due to a triggering event in December 2023, an additional impairment test was performed. As a result, the Company recorded an additional impairment of approximately $40 million. No impairment charges were recorded during the year ended December 31, 2022.
There was a triggering event at August 31, 2023, but it was determined that there was no impairment. Due to a triggering event in December 2023, an additional impairment test was performed. As a result, the Company recorded an additional impairment of approximately $40 million.
As of December 31, 2023, talkMD had not yet commenced operations. The Company has made arrangements to have the income tax returns prepared for talkMD and will advance the funds for the required taxes. Cumulatively, the Company has paid approximately $5,000 on behalf of talkMD for income taxes. We do not engage in off-balance sheet financing arrangements. 52
As of December 31, 2024, talkMD had not yet commenced operations. The Company made arrangements to have the income tax returns prepared for talkMD and advances the funds for the required taxes. Cumulatively, the Company has paid approximately $6,000 on behalf of talkMD for income taxes. We do not engage in off-balance sheet financing arrangements.
Interest expense on the line of credit was $906,000 and $138,000 and the amortization of deferred financing costs was $169,000 and $124,000 during the years ended December 31, 2023 and 2022, respectively. Other Expense - net.
Interest expense on the line of credit was $649,000 and $906,000 and the amortization of deferred financing costs was $127,000 and $169,000 during the years ended December 31, 2024 and 2023, respectively. Other Expense - net.
Consolidated Statements of Operations Data Years Ended December 31, 2023 2022 2021 2020 2019 ($ in thousands, except per share data) Net revenue $ 117,059 $ 138,826 $ 139,599 $ 105,122 $ 64,439 Operating expenses: Direct operating costs 70,817 84,434 86,918 64,821 41,186 Selling and marketing 9,650 9,788 8,786 6,582 1,522 General and administrative 21,464 23,820 24,273 22,811 17,912 Research and development 4,736 4,401 4,408 9,311 871 Change in contingent consideration - (3,090 ) (2,515 ) (1,000 ) (344 ) Depreciation and amortization 14,402 11,725 12,195 9,905 3,006 Goodwill impairment charges 42,000 - - - - Net loss on lease terminations, impairment, unoccupied lease charges and restructuring costs 1,105 1,138 2,005 963 219 Total operating expenses 164,174 132,216 136,070 113,393 64,372 Operating (loss) income (47,115 ) 6,610 3,529 (8,271 ) 67 Interest expense - net (1,040 ) (364 ) (440 ) (446 ) (121 ) Other (expense) income - net (883 ) (637 ) (96 ) 7 (625 ) (Loss) income before (benefit) provision for income taxes (49,038 ) 5,609 2,993 (8,710 ) (679 ) Income tax (benefit) provision (364 ) 177 157 103 193 Net (loss) income $ (48,674 ) $ 5,432 $ 2,836 $ (8,813 ) $ (872 ) Preferred stock dividend 15,674 15,517 14,052 13,877 6,386 Net loss attributable to common shareholders $ (64,348 ) $ (10,085 ) $ (11,216 ) $ (22,690 ) $ (7,258 ) Weighted average common shares outstanding basic and diluted 15,669,472 15,109,587 14,541,061 12,678,845 12,087,947 Net loss per common share: basic and diluted $ (4.11 ) $ (0.67 ) $ (0.77 ) $ (1.79 ) $ (0.60 ) 41 Consolidated Balance Sheet Data As of December 31, 2023 2022 2021 2020 2019 ($ in thousands) Cash $ 3,331 $ 12,299 $ 10,340 $ 20,925 $ 19,994 Working capital - net (1) (57 ) 12,255 5,997 15,795 19,823 Total assets 77,826 136,174 140,848 137,999 56,402 Total liabilities 36,109 34,485 42,917 36,754 13,565 Shareholders’ equity 41,717 101,689 97,931 101,245 42,837 (1) Working capital-net is defined as current assets less current liabilities.
Consolidated Statements of Operations Data Year Ended December 31, 2024 2023 2022 2021 2020 ($ in thousands, except per share data) Net revenue $ 110,837 $ 117,059 $ 138,826 $ 139,599 $ 105,122 Operating expenses: Direct operating costs 60,842 70,817 84,434 86,918 64,821 Selling and marketing 6,232 9,650 9,788 8,786 6,582 General and administrative 16,123 21,464 23,820 24,273 22,811 Research and development 3,781 4,736 4,401 4,408 9,311 Change in contingent consideration - - (3,090 ) (2,515 ) (1,000 ) Depreciation and amortization 14,142 14,402 11,725 12,195 9,905 Goodwill impairment charges - 42,000 - - - Lease terminations, unoccupied lease charges and restructuring costs 596 1,105 1,138 2,005 963 Total operating expenses 101,716 164,174 132,216 136,070 113,393 Operating income (loss) 9,121 (47,115 ) 6,610 3,529 (8,271 ) Net interest expense (812 ) (1,040 ) (364 ) (440 ) (446 ) Other (expense) income - net (298 ) (883 ) (637 ) (96 ) 7 Income (loss) before provision (benefit) for income taxes 8,011 (49,038 ) 5,609 2,993 (8,710 ) Income tax provision (benefit) 160 (364 ) 177 157 103 Net income (loss) $ 7,851 $ (48,674 ) $ 5,432 $ 2,836 $ (8,813 ) Preferred stock dividend 12,310 15,674 15,517 14,052 13,877 Net loss attributable to common shareholders $ (4,459 ) $ (64,348 ) $ (10,085 ) $ (11,216 ) $ (22,690 ) Weighted average common shares outstanding basic and diluted 16,146,975 15,669,472 15,109,587 14,541,061 12,678,845 Net loss per common share: basic and diluted $ (0.28 ) $ (4.11 ) $ (0.67 ) $ (0.77 ) $ (1.79 ) Consolidated Balance Sheet Data As of December 31, 2024 2023 2022 2021 2020 ($ in thousands) Cash $ 5,145 $ 3,331 $ 12,299 $ 10,340 $ 20,925 Working capital - net (1) 5,220 (57 ) 12,255 5,997 15,795 Total assets 71,614 77,826 136,174 140,848 137,999 Total liabilities 21,840 36,109 34,485 42,917 36,754 Shareholders’ equity 49,774 41,717 101,689 97,931 101,245 (1) Working capital-net is defined as current assets less current liabilities.
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. Revenue from these two customers for the year ended December 31, 2023 was approximately $3.1 million, accounting for approximately $9.0 million of the decline in revenue.
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. Revenue from these two customers for the year ended December 31, 2024 was approximately $300,000, accounting for approximately $2.8 million of the decline in revenue.
Goodwill impairment charges represent the impairment recorded as it was determined that the fair value of the Healthcare IT reporting unit was less than the carrying value at both the annual impairment test date of October 31 and as a result of a triggering event in December 2023. 49 Net Loss on Lease Terminations, Unoccupied Lease Charges and Restructuring Costs.
Goodwill impairment charges in 2023 represent the impairment recorded as it was determined that the fair value of the Healthcare IT reporting unit was less than the carrying value at both the annual impairment test date of October 31, 2023 and as a result of a triggering event in December 2023.
During the year ended December 31, 2022, there was positive cash flow from operations of $21.2 million and at year-end, the Company had $12.3 million in cash and positive working capital of $12.3 million. The Company has a revolving line of credit with SVB, and as of December 31, 2023, there was $10 million outstanding.
During the year ended December 31, 2023, there was positive cash flow from operations of $15.5 million and at year-end, the Company had $3.3 million in cash and negative working capital of $57,000. The Company has a revolving line of credit with SVB and, as of December 31, 2023, $10 million was outstanding.
Years Ended December 31, 2023 2022 2021 2020 2019 ($ in thousands) Net (loss) income $ (48,674 ) $ 5,432 $ 2,836 $ (8,813 ) $ (872 ) Depreciation 2,001 1,952 1,927 1,354 909 Amortization 12,401 9,773 10,268 8,551 2,097 Foreign exchange loss / other expense 918 712 241 71 827 Interest expense - net 1,040 364 440 446 121 Income tax (benefit) provision (364 ) 177 157 103 193 Stock-based compensation expense, net of restructuring costs 4,716 4,914 5,396 6,502 3,216 Transaction and integration costs 286 876 1,364 2,694 1,735 Goodwill impairment charges 42,000 - - - - Net loss on lease terminations, impairment, unoccupied lease charges and restructuring costs 1,105 1,138 2,005 963 219 Change in contingent consideration - (3,090 ) (2,515 ) (1,000 ) (344 ) Adjusted EBITDA $ 15,429 $ 22,248 $ 22,119 $ 10,871 $ 8,101 The following table contains a reconciliation of net (loss) income to adjusted EBITDA by quarter.
Year Ended December 31, 2024 2023 2022 2021 2020 ($ in thousands) Net income (loss) $ 7,851 $ (48,674 ) $ 5,432 $ 2,836 $ (8,813 ) Depreciation 2,043 2,001 1,952 1,927 1,354 Amortization 12,099 12,401 9,773 10,268 8,551 Foreign exchange loss / other expense 335 918 712 241 71 Net interest expense 812 1,040 364 440 446 Income tax provision (benefit) 160 (364 ) 177 157 103 Stock-based compensation expense, net of restructuring costs 115 4,716 4,914 5,396 6,502 Transaction and integration costs 46 286 876 1,364 2,694 Goodwill impairment charges - 42,000 - - - Lease terminations, unoccupied lease charges and restructuring costs 596 1,105 1,138 2,005 963 Change in contingent consideration - - (3,090 ) (2,515 ) (1,000 ) Adjusted EBITDA $ 24,057 $ 15,429 $ 22,248 $ 22,119 $ 10,871 46 The following table contains a reconciliation of net income (loss) to adjusted EBITDA by quarter.
Interest income represents interest earned on temporary cash investments and late fees from customers. Interest expense consists primarily of interest costs related to our line of credit, motor vehicle loans and amounts due in connection with acquisitions. Other income (expense) results primarily from foreign currency transaction gains (losses). Income Taxes.
Interest and Other Income (Expense). Interest income represents interest earned on temporary cash investments and late fees from customers. Interest expense consists primarily of interest costs related to our line of credit, motor vehicle loans and amortization of deferred financing costs. Other income (expense) results primarily from foreign currency transaction gains (losses). Income Taxes.
Capitalized software was $8.6 million and $9.2 million during the years ended December 31, 2023 and 2022, respectively. Purchases of property and equipment were $3.1 million and $2.6 million during the years ended December 31, 2023 and 2022, respectively.
Capitalized software was $5.7 million and $8.6 million during the years ended December 31, 2024 and 2023, respectively. Purchases of property and equipment were $1.7 million and $3.1 million during the years ended December 31, 2024 and 2023, respectively.
Year Ended December 31, 2023 2022 Net revenue 100.0 % 100.0 % Operating expenses: Direct operating costs 60.5 % 60.8 % Selling and marketing 8.2 % 7.0 % General and administrative 18.3 % 17.2 % Research and development 4.0 % 3.2 % Change in contingent consideration - (2.2 %) Depreciation and amortization 12.3 % 8.4 % Goodwill impairment charges 35.9 % - Net loss on lease terminations, unoccupied lease charges and restructuring costs 0.9 % 0.8 % Total operating expenses 140.1 % 95.2 % Operating (loss) income (40.1 %) 4.8 % Interest expense - net 0.9 % 0.3 % Other expense - net (0.8 %) (0.5 %) (Loss) income before (benefit) provision for income taxes (41.8 %) 4.0 % Income tax (benefit) provision (0.3 %) 0.1 % Net (loss) income (41.5 %) 3.9 % Comparison of 2023 and 2022 Year Ended December 31, Change 2023 2022 Amount Percent ($ in thousands) Net revenue $ 117,059 $ 138,826 $ (21,767 ) (16 %) Net revenue.
Year Ended December 31, 2024 2023 Net revenue 100.0 % 100.0 % Operating expenses: Direct operating costs 54.9 % 60.5 % Selling and marketing 5.6 % 8.2 % General and administrative 14.5 % 18.3 % Research and development 3.4 % 4.0 % Depreciation and amortization 12.8 % 12.3 % Goodwill impairment charges 0.0 % 35.9 % Lease terminations, unoccupied lease charges and restructuring costs 0.6 % 0.9 % Total operating expenses 91.8 % 140.1 % Operating income (loss) 8.2 % (40.1 %) Net interest expense (0.7 %) 0.9 % Other expense - net (0.3 %) (0.8 %) Income (loss) before provision (benefit) for income taxes 7.2 % (41.8 %) Income tax provision (benefit) 0.1 % (0.3 %) Net income (loss) 7.1 % (41.5 %) Comparison of 2024 and 2023 Year Ended December 31, Change 2024 2023 Amount Percent ($ in thousands) Net revenue $ 110,837 $ 117,059 $ (6,222 ) (5 %) Net revenue.
Revenue decreased by $21.8 million for the year ended December 31, 2023 compared to the year ended December 31, 2022, offset by a decrease in cash operating expenses of $15.8 million for the same period. Accounts receivable decreased by $2.2 million and $1.5 million for the years ended December 31, 2023 and 2022, respectively.
Revenue decreased by $6.2 million for the year ended December 31, 2024 compared to the year ended December 31, 2023, offset by a decrease in cash operating expenses of $20.2 million for the same period. Accounts receivable increased by $1.2 million and decreased by $2.2 million for the years ended December 31, 2024 and 2023, respectively.
Revenue for the years ended December 31, 2023 and December 31, 2022 includes $76.6 million and $88.1 million relating to technology-enabled business solutions, $23.0 million and $34.0 million related to professional services and $13.4 million and $13.6 million for medical practice management services, respectively.
Revenue for the years ended December 31, 2024 and December 31, 2023 includes $73.7 million and $76.6 million relating to technology-enabled business solutions, $18.2 million and $23.0 million related to professional services and $14.4 million and $13.4 million for medical practice management services, respectively.
Salary costs decreased by $9.4 million due to the decrease in the Pakistan exchange rate, a decrease in the U.S. headcount and the redeployment of employees performing functions that were classified as direct operating costs to functions classified as research and development expense.
Salary costs decreased by $6.3 million due to the decrease in the Pakistan exchange rate, a decrease in the U.S. headcount and the redeployment of employees performing functions that were classified as direct operating costs to functions classified as research and development expense. Outsourcing and other customer processing costs decreased by $2.4 million and billable expenses decreased by $1.3 million.
Set forth below is a presentation of our adjusted EBITDA for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 ($ in thousands) Net revenue $ 117,059 $ 138,826 GAAP net (loss) income (48,674 ) 5,432 (Benefit) provision for income taxes (364 ) 177 Net interest expense 1,040 364 Foreign exchange loss / other expense 918 712 Stock-based compensation expense, net of restructuring costs 4,716 4,914 Depreciation and amortization 14,402 11,725 Transaction and integration costs 286 876 Goodwill impairment charges 42,000 - Net loss on lease terminations, unoccupied lease charges and restructuring costs 1,105 1,138 Change in contingent consideration - (3,090 ) Adjusted EBITDA $ 15,429 $ 22,248 Adjusted operating income and adjusted operating margin exclude the following elements which are included in GAAP operating (loss) income: ● Stock-based compensation expense, which includes cash-settled awards and the related taxes, based on changes in the stock price; ● Amortization of purchased intangible assets; ● Integration costs, such as severance amounts paid to employees from acquired businesses and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; ● Goodwill impairment charges; ● Net loss on lease terminations, unoccupied lease charges and restructuring costs; and ● Change in contingent consideration. 39 Set forth below is a presentation of our adjusted operating income and adjusted operating margin, which represents adjusted operating income as a percentage of net revenue, for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 ($ in thousands) Net revenue $ 117,059 $ 138,826 GAAP net (loss) income (48,674 ) 5,432 (Benefit) provision for income taxes (364 ) 177 Net interest expense 1,040 364 Other expense - net 883 637 GAAP operating (loss) income (47,115 ) 6,610 GAAP operating margin (40.2 %) 4.8 % Stock-based compensation expense, net of restructuring costs 4,716 4,914 Amortization of purchased intangible assets 4,975 6,277 Transaction and integration costs 286 876 Goodwill impairment charges 42,000 - Net loss on lease terminations, unoccupied lease charges and restructuring costs 1,105 1,138 Change in contingent consideration - (3,090 ) Non-GAAP adjusted operating income $ 5,967 $ 16,725 Non-GAAP adjusted operating margin 5.1 % 12.0 % Adjusted net income and adjusted net income per share exclude the following elements which are included in GAAP net (loss) income: ● Foreign currency gains and losses and other non-operating expenses; ● Stock-based compensation expense, which includes cash-settled awards and the related taxes, based on changes in the stock price; ● Amortization of purchased intangible assets; ● Integration costs, such as severance amounts paid to employees from acquired businesses and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; ● Goodwill impairment charges; ● Net loss on lease terminations, unoccupied lease charges and restructuring costs; ● Change in contingent consideration; and ● Income tax (benefit) provision resulting from the amortization of goodwill related to our acquisitions.
Set forth below is a presentation of our adjusted EBITDA for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 ($ in thousands) Net revenue $ 110,837 $ 117,059 GAAP net income (loss) 7,851 (48,674 ) Provision (benefit) for income taxes 160 (364 ) Net interest expense 812 1,040 Foreign exchange loss / other expense 335 918 Stock-based compensation expense, net of restructuring costs 115 4,716 Depreciation and amortization 14,142 14,402 Transaction and integration costs 46 286 Goodwill impairment charges - 42,000 Lease terminations, unoccupied lease charges and restructuring costs 596 1,105 Adjusted EBITDA $ 24,057 $ 15,429 Adjusted operating income and adjusted operating margin exclude the following elements which are included in GAAP operating income (loss): ● Stock-based compensation expense, which includes cash-settled awards and the related taxes, based on changes in the stock price; ● Amortization of purchased intangible assets; ● Integration costs, such as severance amounts paid to employees from acquired businesses and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; ● Goodwill impairment charges; and ● Lease terminations, unoccupied lease charges and restructuring costs. 43 Set forth below is a presentation of our adjusted operating income and adjusted operating margin, which represents adjusted operating income as a percentage of net revenue, for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 ($ in thousands) Net revenue $ 110,837 $ 117,059 GAAP net income (loss) 7,851 (48,674 ) Provision (benefit) for income taxes 160 (364 ) Net interest expense 812 1,040 Other expense - net 298 883 GAAP operating income (loss) 9,121 (47,115 ) GAAP operating margin 8.2 % (40.2 %) Stock-based compensation expense, net of restructuring costs 115 4,716 Amortization of purchased intangible assets 1,577 4,975 Transaction and integration costs 46 286 Goodwill impairment charges - 42,000 Lease terminations, unoccupied lease charges and restructuring costs 596 1,105 Non-GAAP adjusted operating income $ 11,455 $ 5,967 Non-GAAP adjusted operating margin 10.3 % 5.1 % Adjusted net income and adjusted net income per share exclude the following elements which are included in GAAP net income (loss): ● Foreign currency gains and losses and other non-operating expenses; ● Stock-based compensation expense, which includes cash-settled awards and the related taxes, based on changes in the stock price; ● Amortization of purchased intangible assets; ● Integration costs, such as severance amounts paid to employees from acquired businesses and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements; ● Goodwill impairment charges; ● Lease terminations, unoccupied lease charges and restructuring costs; and ● Income tax provision (benefit) resulting from the amortization of goodwill related to our acquisitions.
Accounts payable, accrued compensation and accrued expenses increased by $3.3 million and $6.6 million for the years ended December 31, 2023 and 2022, respectively. Investing Activities Cash used in investing activities during the year ended December 31, 2023 was $11.6 million , a decrease of $154,000 compared to $11.8 million during the year ended December 31, 2022.
Accounts payable, accrued compensation and accrued expenses decreased by $4.7 million and $3.3 million for the years ended December 31, 2024 and 2023, respectively. 54 Investing Activities Cash used in investing activities during the year ended December 31, 2024 was $7.4 million, a decrease of $4.2 million compared to $11.6 million during the year ended December 31, 2023.
Although the Company reported GAAP earnings in 2022, it incurred losses historically and in 2023 and there is uncertainty regarding future U.S. taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740.
Although the Company reported GAAP earnings in 2024, it has incurred losses historically and there is uncertainty regarding future U.S. taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all deferred tax assets as of December 31, 2024 and December 31, 2023.
The interest rate on our line of credit is based on prime rate which had been increasing through 2023 but now appears to be remaining steady. Operating Activities Cash provided by operating activities was $15.5 million and $ 21.2 million during the years ended December 31, 2023 and 2022, respectively.
The interest rate on our line of credit is based on the prime rate which had been increasing through 2023 but decreased during 2024. Operating Activities Cash provided by operating activities was $20.6 million and $15.5 million during the years ended December 31, 2024 and 2023, respectively.
The fair value amount assigned to intangible assets is based on an exit price from a market participant’s viewpoint, and utilizes data such as discounted cash flow analysis and replacement cost models.
Assets acquired and liabilities assumed are recorded at the date of acquisition at their respective fair values. The fair value amount assigned to intangible assets is based on an exit price from a market participant’s viewpoint, and utilizes data such as discounted cash flow analysis and replacement cost models.
The impairment charge resulted in the reversal of the entire deferred tax liability at December 31, 2023. 50 The Company will maintain a full valuation allowance on deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
There was no deferred tax liability recorded at December 31, 2024. 53 The Company will maintain a full valuation allowance on deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
Liquidity and Capital Resources During the year ended December 31, 2023, there was positive cash flow from operations of $15.5 million and at year-end, the Company had $3.3 million in cash and negative working capital of $57,000.
Liquidity and Capital Resources During the year ended December 31, 2024, there was positive cash flow from operations of $20.6 million and at year-end, the Company had $5.1 million in cash and positive working capital of $5.2 million.
Contractual Obligations and Commitments We have contractual obligations under our line of credit. We also maintain operating leases for property and certain office equipment. We were in compliance with all SVB covenants in 2023.
Net proceeds on the line of credit were $2.0 million during the year ended December 31, 2023. Contractual Obligations and Commitments We have contractual obligations under our line of credit. We also maintain operating leases for property and certain office equipment. We were in compliance with all SVB covenants in 2024.
Net revenue of $117.1 million for the year ended December 31, 2023 decreased by $21.8 million or 16% from revenue of $138.8 million for the year ended December 31, 2022.
Net revenue of $110.8 million for the year ended December 31, 2024 decreased by $6.2 million or 5% from revenue of $117.1 million for the year ended December 31, 2023.
As of December 31, 2023, the Company has a total federal NOL carry forward of approximately $274 million of which approximately $198 million will expire between 2034 and 2037, and the balance of approximately $76 million has an indefinite life.
As of December 31, 2024, the Company has a total federal NOL carry forward of approximately $265 million of which approximately $187 million will expire between 2031 and 2038, and the balance of approximately $78 million has an indefinite life.
During the year ended December 31, 2023, the Company sold 59,773 shares of 8.75% Series B Preferred Stock and raised $1.4 million in net proceeds after fees and expenses. During the year ended December 31, 2022, the Company sold 1,324,858 shares of 8.75% Series B Preferred Stock and raised $30.9 million in net proceeds after fees and expenses.
The line of credit was fully repaid during the year ended December 31, 2024 and there was nothing outstanding at December 31, 2024. During the year ended December 31, 2023, the Company sold 59,773 shares of 8.75% Series B Preferred Stock and raised $1.4 million in net proceeds after fees and expenses.
The Company has determined that its business consists of two operating segments and two reporting units (Healthcare IT and Medical Practice Management). Application of the goodwill impairment test requires judgment including the use of a discounted cash flow approach, the trading price of publicly traded stock and the guideline public company method. These analyses require significant assumptions and judgments.
Application of the goodwill impairment test requires judgment including the use of a discounted cash flow approach, the trading price of publicly traded stock and the guideline public company method. These analyses require significant assumptions and judgments.
Net Loss on Lease Terminations, Unoccupied Lease Charges and Restructuring Costs. Net loss on lease termination represents the write-off of leasehold improvements and gains or losses as the result of lease terminations. Unoccupied lease charges represent the portion of lease and related costs for vacant space not being utilized by the Company.
Lease terminations represent the write-off of leasehold improvements and gains or losses as the result of lease terminations. Unoccupied lease charges represent the portion of lease and related costs for vacant space not being utilized by the Company. Restructuring costs, primarily consist of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.
The following table shows our reconciliation of GAAP net (loss) income to non-GAAP adjusted net income for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 ($ in thousands) GAAP net (loss) income $ (48,674 ) $ 5,432 Foreign exchange loss / other expense 918 712 Stock-based compensation expense, net of restructuring costs 4,716 4,914 Amortization of purchased intangible assets 4,975 6,277 Transaction and integration costs 286 876 Goodwill impairment charges 42,000 - Net loss on lease terminations, unoccupied lease charges and restructuring costs 1,105 1,138 Change in contingent consideration - (3,090 ) Income tax (benefit) provision related to goodwill (525 ) 75 Non-GAAP adjusted net income $ 4,801 $ 16,334 40 Year Ended December 31, 2023 2022 GAAP net loss attributable to common shareholders, per share $ (4.11 ) $ (0.67 ) Impact of preferred stock dividend 1.04 1.03 Net (loss) income per end-of-period share (3.07 ) 0.36 Foreign exchange loss / other expense 0.06 0.05 Stock-based compensation expense 0.30 0.32 Amortization of purchased intangible assets 0.31 0.41 Transaction and integration costs 0.02 0.06 Goodwill impairment charges 2.65 - Net loss on lease terminations, unoccupied lease charges and restructuring costs 0.07 0.07 Change in contingent consideration 0.00 (0.20 ) Income tax (benefit) provision related to goodwill (0.04 ) 0.00 Non-GAAP adjusted earnings per share $ 0.30 $ 1.07 End-of-period common shares 15,880,092 15,229,405 In-the-money warrants and outstanding unvested RSUs 733,908 598,245 Total fully diluted shares 16,614,000 15,827,650 Non-GAAP adjusted diluted earnings per share $ 0.29 $ 1.03 For purposes of determining non-GAAP adjusted earnings per share, the Company used the number of common shares outstanding at the end of December 31, 2023 and 2022.
The following table shows our reconciliation of GAAP net income (loss) to non-GAAP adjusted net income for the years ended December 31, 2024 and 2023: Year Ended December 31, 2024 2023 ($ in thousands) GAAP net income (loss) $ 7,851 $ (48,674 ) Foreign exchange loss / other expense 335 918 Stock-based compensation expense, net of restructuring costs 115 4,716 Amortization of purchased intangible assets 1,577 4,975 Transaction and integration costs 46 286 Goodwill impairment charges - 42,000 Lease terminations, unoccupied lease charges and restructuring costs 596 1,105 Income tax benefit related to goodwill - (525 ) Non-GAAP adjusted net income $ 10,520 $ 4,801 44 Year Ended December 31, 2024 2023 GAAP net loss attributable to common shareholders, per share $ (0.28 ) $ (4.11 ) Impact of preferred stock dividend 0.76 1.04 Net income (loss) per end-of-period share 0.48 (3.07 ) Foreign exchange loss / other expense 0.02 0.06 Stock-based compensation expense, net of restructuring costs 0.01 0.30 Amortization of purchased intangible assets 0.10 0.31 Transaction and integration costs 0.00 0.02 Goodwill impairment charges - 2.65 Lease terminations, unoccupied lease charges and restructuring costs 0.04 0.07 Income tax benefit related to goodwill - (0.04 ) Non-GAAP adjusted earnings per share $ 0.65 $ 0.30 End-of-period common shares 16,256,236 15,880,092 Outstanding unvested RSUs 242,500 733,908 Total fully diluted shares 16,498,736 16,614,000 Non-GAAP adjusted diluted earnings per share $ 0.64 $ 0.29 For purposes of determining non-GAAP adjusted earnings per share, the Company used the number of common shares outstanding at the end of December 31, 2024 and 2023.
Cash provided by financing activities during 2023 includes $1.4 million of net proceeds from issuing 59,773 shares, offset by $888,000 of repayments for debt obligations, and $14.3 million of preferred stock dividends.
Cash provided by financing activities during 2023 includes $1.4 million of net proceeds from issuing 59,773 shares of Series B Preferred Stock, offset by $888,000 of repayments for debt obligations, and $14.3 million of preferred stock dividends paid. There was also $579,000 of payments to settle the tax withholding obligations in 2024 compared to $1.5 million in 2023.
Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. 47 Results of Operations The following table sets forth our consolidated results of operations as a percentage of total revenue for the years shown.
Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. Results of Operations The following table sets forth our consolidated results of operations as a percentage of total revenue for the years shown.
General and administrative expense of $21.5 million for the year ended December 31, 2023 decreased by $2.4 million or 10% from general and administrative expense of $23.8 million for the year ended December 31, 2022. Salary costs decreased by $1.1 million due to the decrease in headcount and the Pakistan exchange rate.
General and administrative expense of $16.1 million for the year ended December 31, 2024 decreased by $5.3 million or 25% from general and administrative expense of $21.5 million for the year ended December 31, 2023. Salary costs decreased by $3.5 million due to the decrease in headcount and the Pakistan exchange rate. Legal, professional and audit fees decreased by $790,000.
Interest income of $154,000 for the year ended December 31, 2023 increased by $113,000 or 276% from interest income of $41,000 for the year ended December 31, 2022. The interest income represents interest earned on temporary cash investments, which increased due to rising interest rates and late fees from customers. Interest Expense.
Interest income of $88,000 for the year ended December 31, 2024 decreased by $66,000 or 43% from interest income of $154,000 for the year ended December 31, 2023. The interest income represents late fees from customers and interest earned on temporary cash investments, which decreased due to lower balances being invested. Interest Expense.
A significant portion of those expenses were personnel-related costs (approximately 76% and 79% of foreign costs for the years ended December 31, 2023 and 2022, 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.
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.
Accordingly, a valuation allowance has been recorded against all deferred tax assets as of December 31, 2023 and December 31, 2022. For the global intangible low-taxed income (“GILTI”) tax, companies can either account for the GILTI inclusion in the period in which they are incurred or establish deferred tax liabilities for the expected future taxes associated with GILTI.
For the global intangible low-taxed income (“GILTI”) tax, companies can either account for the GILTI inclusion in the period in which they are incurred or establish deferred tax liabilities for the expected future taxes associated with GILTI.
These renewal percentages are not indicative of the loss of revenue due to non-renewal. 43 Sources of Revenue Revenue: We primarily derive our on-going revenues from technology-enabled business solutions, reported in our Healthcare IT segment, which typically includes revenue cycle management and is billed as a percentage of payments collected by our customers.
Sources of Revenue Revenue: We primarily derive our on-going revenues from technology-enabled business solutions, reported in our Healthcare IT segment, which typically includes revenue cycle management and is billed as a percentage of payments collected by our customers. This fee includes the ability to use our EHR, practice management systems and other software as part of the bundled fee.
In addition, during the year ended December 31, 2023, the Company paid $27,000 to settle a claim regarding a lease termination in India. Unoccupied lease charges represent the portion of lease and related costs for that portion of the space that is vacant and not being utilized by the Company.
Unoccupied lease charges represent the portion of lease and related costs for that portion of the space that is vacant and not being utilized by the Company. Unoccupied lease charges for the year ended December 31, 2023 were $169,000. There were no unoccupied lease charges in 2024.
Direct operating costs of $70.8 million for the year ended December 31, 2023 decreased by $13.6 million or 16% from direct operating costs of $84.4 million for the year ended December 31, 2022.
Direct operating costs of $60.8 million for the year ended December 31, 2024 decreased by $10.0 million or 14% from direct operating costs of $70.8 million for the year ended December 31, 2023.
December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2023 2023 2023 2023 2022 2022 2022 2022 ($ in thousands) Net (loss) income $ (43,692 ) $ (2,749 ) $ (1,832 ) $ (401 ) $ 499 $ 1,056 $ 2,737 $ 1,140 Depreciation 505 493 511 492 547 474 482 449 Amortization 3,615 3,410 2,830 2,546 2,492 2,336 2,454 2,491 Foreign exchange loss (gain) / other expense 309 426 191 (8 ) 353 523 (108 ) (56 ) Net interest expense 335 300 275 130 83 82 104 95 Income tax (benefit) provision (568 ) 57 82 65 33 55 25 64 Stock-based compensation expense, net of restructuring costs 933 1,209 1,502 1,072 1,515 1,328 1,184 887 Transaction and integration costs 16 91 107 72 152 316 306 102 Goodwill impairment charges 42,000 - - - - - - - Net loss on lease terminations, unoccupied lease charges and restructuring costs 675 8 153 269 210 307 463 158 Change in contingent consideration - - - - (200 ) (1,660 ) (630 ) (600 ) Adjusted EBITDA $ 4,128 $ 3,245 $ 3,819 $ 4,237 $ 5,684 $ 4,817 $ 7,017 $ 4,730 Key Metrics In addition to the line items in our consolidated financial statements, we regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, make strategic business decisions, and assess market share trends and working capital needs.
December 31, September 30, June 30, March 31, December 31, September 30, June 30, March 31, 2024 2024 2024 2024 2023 2023 2023 2023 ($ in thousands) Net income (loss) $ 3,296 $ 3,122 $ 1,674 $ (241 ) $ (43,692 ) $ (2,749 ) $ (1,832 ) $ (401 ) Depreciation 533 504 503 503 505 493 511 492 Amortization 2,724 2,737 3,211 3,427 3,615 3,410 2,830 2,546 Foreign exchange loss (gain) / other expense 91 (57 ) 306 (5 ) 309 426 191 (8 ) Net interest expense 48 162 264 338 335 300 275 130 Income tax provision (benefit) 41 41 39 39 (568 ) 57 82 65 Stock-based compensation expense, net of restructuring costs 306 252 265 (708 ) 933 1,209 1,502 1,072 Transaction and integration costs 11 12 11 12 16 91 107 72 Goodwill impairment charges - - - - 42,000 - - - Lease terminations, unoccupied lease charges and restructuring costs 91 67 116 322 675 8 153 269 Adjusted EBITDA $ 7,141 $ 6,840 $ 6,389 $ 3,687 $ 4,128 $ 3,245 $ 3,819 $ 4,237 Key Metrics In addition to the line items in our consolidated financial statements, we regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, make strategic business decisions, and assess market share trends and working capital needs.
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. Goodwill Impairment Charges. Goodwill impairment charges, which were related to the Healthcare IT reporting unit, represent the impairment recorded as it was determined that the fair value of the goodwill was less than the carrying value.
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. Goodwill Impairment Charges.
Charges of $102,000 for the year ended December 31, 2023, were incurred as a result of vacating the former premises. 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 year ended December 31, 2023 of $162,000.
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 year ended December 31, 2023 of $162,000. In addition, during the year ended December 31, 2023, the Company paid $27,000 to settle a claim regarding a lease termination in India.
Net loss on lease terminations represents the write-off of leasehold improvements and gains or losses as the result of lease terminations. During the year ended December 31, 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.
During the year ended December 31, 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 $102,000 for the year ended December 31, 2023, were incurred as a result of vacating the former premises.
Our professional services include an extensive set of services including EHR vendor-agnostic optimization and activation, project management, IT transformation, consulting, process improvement, training, education and staffing for large healthcare organizations including health systems and hospitals. Revenue is recorded monthly on either a time and materials or a fixed rate basis for each contract.
Revenue is also generated from coding, credentialing, indexing, transcription and other ancillary services. Our professional services include an extensive set of services including EHR vendor-agnostic optimization and activation, project management, IT transformation, consulting, process improvement, training, education and staffing for large healthcare organizations including health systems and hospitals.
Other expense - net was $883,000 for the year ended December 31, 2023 compared to other expense - net of $637,000 for the year ended December 31, 2022. Other expense primarily represents foreign currency transaction gains and losses. There were foreign exchange losses of $790,000 and $610,000 for the years ended December 31, 2023 and 2022, respectively.
Other expense - net was $298,000 for the year ended December 31, 2024 compared to other expense - net of $883,000 for the year ended December 31, 2023. Other expense primarily represents foreign currency transaction gains and losses and legal settlements made by the Company.
Interest expense of $1.2 million for the year ended December 31, 2023 increased by $789,000 or 195% from interest expense of $405,000 for the year ended December 31, 2022. The increase in interest expense was due to the increased use of the line of credit and increases in interest rates.
Interest expense of $900,000 for the year ended December 31, 2024 decreased by $294,000 or 25% from $1.2 million for the year ended December 31, 2023. The decrease in interest expense was due to the decreased use of the line of credit and decreases in the interest rate charged.
The pre-tax loss and pre-tax income was $49 million and $5.6 million for the years ended December 31, 2023 and 2022, respectively. The Company has incurred losses historically and there is uncertainty regarding future U.S. taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740.
Although the Company reported GAAP earnings in 2024, it has incurred losses historically and there is uncertainty regarding future U.S. taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance was recorded against all deferred tax assets at December 31, 2024 and 2023.
Accordingly, a valuation allowance was recorded against all deferred tax assets at December 31, 2023 and 2022. The Company has recorded goodwill as a result of its acquisitions. Goodwill is generally not amortized for financial reporting purposes. However, goodwill from asset acquisitions is tax deductible and amortized over 15 years for tax purposes.
The Company has recorded goodwill as a result of its acquisitions. Goodwill is generally not amortized for financial reporting purposes. However, goodwill from asset acquisitions is tax deductible and amortized over 15 years for tax purposes. As such, deferred income tax expense and a deferred tax liability arise as a result of the tax-deductibility of this indefinitely lived asset.
We also generate revenue from our printing and mailing, group purchasing services and medical practice management services. We earned approximately 1% of our revenue from group purchasing services during both the years ended December 31, 2023 and 2022.
Revenue is recorded monthly on either a time and materials or a fixed rate basis for each contract. We also generate revenue from our printing and mailing, group purchasing services and medical practice management services. 47 We earned approximately 1% of our revenue from group purchasing services during both years ended December 31, 2024 and 2023.
As a result of the annual impairment test, an impairment of approximately $2 million was recorded. The Company will also test for impairment between annual test dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is performed at the reporting-unit level.
The Company also tests for impairment between annual test dates if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is performed at the reporting-unit level. The Company has determined that its business consists of two operating segments and two reporting units (Healthcare IT and Medical Practice Management).
Year Ended December 31, Change 2023 2022 Amount Percent ($ in thousands) Net cash provided by operating activities $ 15,461 $ 21,151 $ (5,690 ) (27 %) Net cash used in investing activities (11,613 ) (11,767 ) 154 1 % Net cash used in financing activities (13,285 ) (7,650 ) (5,635 ) (74 %) Effect of exchange rate changes on cash 469 225 244 108 % Net (decrease) increase in cash $ (8,968 ) $ 1,959 $ (10,927 ) (558 %) The loss before income taxes was $49 million for the year ended December 31, 2023, of which $42 million was a non-cash goodwill impairment charge and $14.4 million was non-cash depreciation.
Year Ended December 31, Change 2024 2023 Amount Percent ($ in thousands) Net cash provided by operating activities $ 20,642 $ 15,461 $ 5,181 34 % Net cash used in investing activities (7,406 ) (11,613 ) 4,207 36 % Net cash used in financing activities (11,256 ) (13,285 ) 2,029 15 % Effect of exchange rate changes on cash (166 ) 469 (635 ) (135 %) Net increase (decrease) in cash $ 1,814 $ (8,968 ) $ 10,782 120 % The income before income taxes was $8.0 million for the year ended December 31, 2024, which included $14.1 million of non-cash depreciation and amortization.
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.
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. 42 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.
Financing Activities Cash used by financing activities during the year ended December 31, 2023 was $13.3 million, compared to $7.7 million of cash used for the year ended December 31, 2022.
Financing Activities Cash used by financing activities during the year ended December 31, 2024 was $11.3 million, compared to $13.3 million of cash used for the year ended December 31, 2023. Cash used by financing activities during 2024 includes the full repayment of the credit line of $10 million and $677,000 of repayments for debt obligations.
The performance obligation is satisfied once the medical provider agrees to purchase a specific quantity of vaccines and the medical provider’s information is forwarded to the vaccine suppliers.
The performance obligation is satisfied once the medical provider agrees to purchase a specific quantity of vaccines and the medical provider’s information is forwarded to the vaccine suppliers. The Company records a contract asset for revenue earned and not paid as the ultimate payment is conditioned on achieving certain volume thresholds.
Although we believe that our approach to estimates and judgments is reasonable, actual results could differ, and we may be exposed to increases or decreases in revenue that could be material. Our estimates of variable consideration may prove to be inaccurate, in which case we may have understated or overstated the revenue recognized in an accounting period.
The estimate of the amounts to be received from the insurance claims are updated at each reporting period. Although we believe that our approach to estimates and judgments is reasonable, actual results could differ, and we may be exposed to increases or decreases in revenue that could be material.
(Refer to Forward-Looking Statements disclosure on page 2 of this Form 10-K.) 48 Year Ended December 31, Change 2023 2022 Amount Percent ($ in thousands) Direct operating costs $ 70,817 $ 84,434 $ (13,617 ) (16 %) Selling and marketing 9,650 9,788 (138 ) (1 %) General and administrative 21,464 23,820 (2,356 ) (10 %) Research and development 4,736 4,401 335 8 % Change in contingent consideration - (3,090 ) 3,090 100 % Depreciation 2,001 1,952 49 3 % Amortization 12,401 9,773 2,628 27 % Goodwill impairment charges 42,000 - 42,000 100 % Net loss on lease terminations, unoccupied lease charges and restructuring costs 1,105 1,138 (33 ) (3 %) Total operating expenses $ 164,174 $ 132,216 $ 31,958 24 % Direct Operating Costs.
(Refer to Forward-Looking Statements disclosure on page 3 of this Form 10-K.) 51 Year Ended December 31, Change 2024 2023 Amount Percent ($ in thousands) Direct operating costs $ 60,842 $ 70,817 $ (9,975 ) (14 %) Selling and marketing 6,232 9,650 (3,418 ) (35 %) General and administrative 16,123 21,464 (5,341 ) (25 %) Research and development 3,781 4,736 (955 ) (20 %) Depreciation 2,043 2,001 42 2 % Amortization 12,099 12,401 (302 ) (2 %) Goodwill impairment charges - 42,000 (42,000 ) (100 %) Lease terminations, unoccupied lease charges and restructuring costs 596 1,105 (509 ) (46 %) Total operating expenses $ 101,716 $ 164,174 $ (62,458 ) (38 %) Direct Operating Costs.
Research and development expense of $4.7 million for the year ended December 31, 2023 increased by $335,000 or 8% from research and development expense of $4.4 million for the year ended December 31, 2022.
Other costs such as computer expenses, utilities and office supplies decreased by $295,000. Research and Development Expense. Research and development expense of $3.8 million for the year ended December 31, 2024 decreased by $955,000 or 20% from research and development expense of $4.7 million for the year ended December 31, 2023.
During the years ended December 31, 2023 and 2022, the Company capitalized approximately $8.6 million and $9.2 million of development costs in connection with its internal-use software, respectively. Change in Contingent Consideration. The change of $3.1 million for the year ended December 31, 2022 reflected the estimated decrease in the fair value of the contingent consideration from the medSR acquisition.
During the years ended December 31, 2024 and 2023, the Company capitalized approximately $5.7 million and $8.6 million of development costs, respectively, in connection with its internal-use software. Depreciation Expense. Depreciation expense was $2.0 million for both the years ended December 31, 2024 and 2023. Amortization Expense.
Our renewal rates for 2023 and 2022 were 91% and 98% of the number of practices that renewed, respectively.
Our renewal rates for 2024 and 2023 were 95% and 91% of the number of practices that renewed, respectively. These renewal percentages are not indicative of the loss of revenue due to non-renewal.
There was a $364,000 benefit for income taxes for the year ended December 31, 2023 compared to the provision for income taxes of $177,000 for the year ended December 31, 2022.
Whenever the exchange rate varies, the gains and losses are recorded in the consolidated statements of operations. Income Tax Provision (Benefit). There was a $160,000 provision for income taxes for the year ended December 31, 2024 compared to the benefit for income taxes of $364,000 for the year ended December 31, 2023.
Changes in the fair value of the contingent consideration after the acquisition date are included in earnings if the contingent consideration is recorded as a liability. Goodwill Impairment: Goodwill is evaluated for impairment annually as of October 31 st , referred to as the annual test date.
Goodwill Impairment: Goodwill is evaluated for impairment annually as of October 31 st , referred to as the annual test date. As a result of the annual impairment test, an impairment of approximately $2 million was recorded in October 2023.
Selling and marketing expense of $9.7 million for the year ended December 31, 2023 decreased by $138,000 or 1% from selling and marketing expense of $9.8 million for the year ended December 31, 2022. The decrease for the year ended December 31, 2023 was due to lower spending on selling and marketing activities. General and Administrative Expense.
The decrease for the year ended December 31, 2024 was due to lower spending on selling and marketing activities and a reduction in headcount. General and Administrative Expense.
The Company records a contract asset for revenue earned and not paid as the ultimate payment is conditioned on achieving certain volume thresholds. 46 Practice management services: We estimate the amount that will be collected on claims submitted to insurance carriers which is used to determine the compensation to be paid to the owners of the managed practices.
Practice management services: We estimate the amount that will be collected on claims submitted to insurance carriers which is used to determine the compensation to be paid to the owners of the managed practices. These compensation amounts reduce the revenue that the Company recognizes since they are deducted from gross billings.
Contingent consideration is adjusted to fair value at the end of each reporting period. 44 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.
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.
Revenue from these customers is expected to be approximately $300,000 for the year 2024.
No further revenue from these customers is expected for the year 2025.
It also includes SaaS fees, for clients not utilizing revenue cycle management services. When clients utilize our revenue cycle management services, basic SaaS services are included at no additional charge. Revenue is also generated from coding, credentialing, indexing, transcription and other ancillary services.
Key drivers of our revenue include growth in the number of providers we are servicing, the number of patients served by those providers, and collections by those providers. It also includes SaaS fees, for clients not utilizing revenue cycle management services. When clients utilize our revenue cycle management services, basic SaaS services are included at no additional charge.

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