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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2026

or

| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-36529

CareCloud, Inc.

(Exact name of registrant as specified in its charter)

Delaware |  | 22-3832302
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Number)

7 Clyde Road Somerset, New Jersey |  | 08873
(Address of principal executive offices) |  | (Zip Code)

(732) 873-5133

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, par value $0.001 per share |  | CCLD |  | Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ | Accelerated filer ☒
Non-accelerated filer ☐ | Smaller reporting company ☒
| Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At July 30, 2026, the registrant had 42,493,859 shares of common stock, par value $0.001 per share, outstanding.

INDEX

| Page
Forward-Looking Statements | 2
PART I. FINANCIAL INFORMATION
Item 1. | Condensed Consolidated Financial Statements (Unaudited) |
| Condensed Consolidated Balance Sheets at June 30, 2026 and December 31, 2025 | 4
| Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2026 and 2025 | 5
| Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2026 and 2025 | 6
| Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2026 and 2025 | 7
| Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2026 and 2025 | 8
| Notes to Condensed Consolidated Financial Statements | 9
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 45
Item 4. | Controls and Procedures | 45
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings | 46
Item 1A. | Risk Factors | 46
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 46
Item 3. | Defaults Upon Senior Securities | 46
Item 4. | Mine Safety Disclosures | 47
Item 5. | Other Information | 47
Item 6. | Exhibits | 47
Signatures | 48

1

Forward-Looking Statements

Certain statements that we make from time to time, including statements contained in this Quarterly Report on Form 10-Q, 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. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. These statements relate to anticipated future events, future results of operations or future financial performance. 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. Our operations involve risks and uncertainties, many of which are outside of 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. Forward-looking statements in this Quarterly Report on Form 10-Q 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.

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. 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” in our Annual Report on Form 10-K filed with the SEC on March 12, 2026. 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 maintain operations in Pakistan, Azad Jammu and Kashmir, and Sri Lanka in a manner that continues to enable us to offer competitively priced products and services;
| ● | our ability to operate in a global business environment that may be affected by geopolitical developments, including regional conflicts, trade restrictions, sanctions, changes in diplomatic relations or political stability;
| ● | 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 respond to the recent cybersecurity incident and effectively integrate, manage and keep our information systems secure and operational in the event of another cyber-attack;
| ● | our ability to manage our growth, including acquiring, partnering with, and effectively integrating the acquisitions of Empower Healthcare & Compliance Partners, MAP App, Medsphere Systems Corporation, RevNu Medical Management and other acquired businesses into our infrastructure and avoiding legal exposure and liabilities associated with our acquisitions;
| ● | 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 keep pace with a rapidly changing healthcare industry, including the use of artificial intelligence (“AI”);
| ● | 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, Stephen Snyder as Chief Executive Officer and A. Hadi Chaudhry as Chief Strategy Officer, all of which are critical to our ongoing operations and growing our business;
| ● | our ability to realize the expected cost savings and benefits from our restructuring activities and structural cost reductions;
| ● | our ability to make assumptions regarding the continuation, signing, scope and timing of certain client, vendor and partner relationships and the commencement and timing of client projects, which reflect management’s current beliefs and expectations and may not materialize on the anticipated schedule or at all;
| ● | our ability to timely and effectively complete the integration of acquired businesses and execute expense-structure and related operational initiatives necessary to align our cost structure with our adjusted EBITDA and earnings-per-share objectives;
| ● | our ability to comply with the covenants and the required principal and interest payments contained in our credit agreement with our senior secured lenders, Citizens Bank, N.A. and Provident Bank, and other future debt facilities;
| ● | our ability to continue to pay our monthly dividends to the holders of our Series A Preferred Stock;

2

| ● | 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 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 Quarterly Report on Form 10-Q or our other filings with the Securities and Exchange Commission (the “SEC”).

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations, beliefs and views as of the date of this Quarterly Report on Form 10-Q concerning future developments and their potential effects on our business. Although we believe that the expectations reflected in the forward-looking statements contained in this Quarterly Report on Form 10-Q are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We anticipate that subsequent events and developments may cause our assessments to change. 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 Quarterly Report on Form 10-Q.

You should read this Quarterly Report on Form 10-Q 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. The forward-looking statements contained herein should not be relied upon as representing our assessments as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

3

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CARECLOUD, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2026 AND DECEMBER 31, 2025

($ in thousands, except share and per share amounts)

|  | June 30, 2026 |  |  | December 31, 2025 |
|  | (Unaudited) |  |  |  |
ASSETS |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |
Cash |  | $ | 13,395 |  |  | $ | 3,117 |
Restricted cash |  |  | - |  |  |  | 500 |
Accounts receivable - net |  |  | 14,117 |  |  |  | 15,062 |
Contract asset |  |  | 3,426 |  |  |  | 3,664 |
Inventory |  |  | 471 |  |  |  | 507 |
Current assets - related party |  |  | 16 |  |  |  | 16 |
Prepaid expenses and other current assets |  |  | 2,758 |  |  |  | 2,872 |
Total current assets |  |  | 34,183 |  |  |  | 25,738 |
Property and equipment - net |  |  | 7,259 |  |  |  | 7,775 |
Operating lease right-of-use assets |  |  | 4,864 |  |  |  | 3,106 |
Intangible assets - net |  |  | 14,929 |  |  |  | 18,968 |
Goodwill |  |  | 31,835 |  |  |  | 31,442 |
Other assets |  |  | 779 |  |  |  | 569 |
TOTAL ASSETS |  | $ | 93,849 |  |  | $ | 87,598 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |
Accounts payable |  | $ | 6,071 |  |  | $ | 6,937 |
Accrued compensation |  |  | 3,846 |  |  |  | 4,136 |
Accrued expenses |  |  | 5,943 |  |  |  | 5,970 |
Operating lease liability (current portion) |  |  | 1,573 |  |  |  | 927 |
Deferred revenue (current portion) |  |  | 4,507 |  |  |  | 4,148 |
Term loans and other (current portion) |  |  | 10,756 |  |  |  | 728 |
Contingent consideration (current portion) |  |  | 400 |  |  |  | 909 |
Dividend payable |  |  | 392 |  |  |  | 668 |
Total current liabilities |  |  | 33,488 |  |  |  | 24,423 |
Term loans and other |  |  | 29,223 |  |  |  | 441 |
Borrowings under line of credit |  |  | 9,000 |  |  |  | - |
Contingent consideration |  |  | 290 |  |  |  | 232 |
Operating lease liability |  |  | 3,462 |  |  |  | 2,187 |
Deferred revenue |  |  | 934 |  |  |  | 809 |
Deferred tax liability |  |  | 50 |  |  |  | - |
Total liabilities |  |  | 76,447 |  |  |  | 28,092 |
COMMITMENTS AND CONTINGENCIES (NOTE 9) |  |  | - |  |  |  |  |
SHAREHOLDERS’ EQUITY: |  |  |  |  |  |  |  |
Preferred stock, $0.001 par value - authorized 7,000,000 shares. Series A, issued and outstanding 984,530 shares at June 30, 2026 and December 31, 2025. Series B, issued and outstanding 0 and 1,511,372 shares at June 30, 2026 and December 31, 2025, respectively. |  |  | 1 |  |  |  | 2 |
Common stock, $0.001 par value - authorized 85,000,000 shares. Issued 43,234,658 and 43,178,748 shares at June 30, 2026 and December 31, 2025, respectively. Outstanding 42,493,859 and 42,437,949 shares at June 30, 2026 and December 31, 2025, respectively. |  |  | 43 |  |  |  | 43 |
Additional paid-in capital |  |  | 75,735 |  |  |  | 119,936 |
Accumulated deficit |  |  | (53,788 | ) |  |  | (55,832 | )
Accumulated other comprehensive loss |  |  | (3,927 | ) |  |  | (3,981 | )
Less: 740,799 common shares held in treasury, at cost at June 30, 2026 and December 31, 2025 |  |  | (662 | ) |  |  | (662 | )
Total shareholders’ equity |  |  | 17,402 |  |  |  | 59,506 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |  | $ | 93,849 |  |  | $ | 87,598 |

See notes to condensed consolidated financial statements.

4

CARECLOUD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025

($ in thousands, except share and per share amounts)

|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
NET REVENUE |  | $ | 31,880 |  |  | $ | 27,377 |  |  | $ | 63,150 |  |  | $ | 55,009 |
OPERATING EXPENSES: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Direct operating costs |  |  | 17,457 |  |  |  | 14,480 |  |  |  | 34,307 |  |  |  | 29,944 |
Selling and marketing |  |  | 1,300 |  |  |  | 1,118 |  |  |  | 2,714 |  |  |  | 2,249 |
General and administrative |  |  | 5,370 |  |  |  | 4,358 |  |  |  | 10,866 |  |  |  | 8,690 |
Research and development |  |  | 2,194 |  |  |  | 1,020 |  |  |  | 4,610 |  |  |  | 2,255 |
Change in contingent consideration |  |  | (34 | ) |  |  | - |  |  |  | 23 |  |  |  | - |
Depreciation and amortization |  |  | 3,731 |  |  |  | 3,382 |  |  |  | 7,768 |  |  |  | 6,719 |
Restructuring costs |  |  | - |  |  |  | 23 |  |  |  | - |  |  |  | 137 |
Total operating expenses |  |  | 30,018 |  |  |  | 24,381 |  |  |  | 60,288 |  |  |  | 49,994 |
OPERATING INCOME |  |  | 1,862 |  |  |  | 2,996 |  |  |  | 2,862 |  |  |  | 5,015 |
OTHER: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  |  | 73 |  |  |  | 51 |  |  |  | 83 |  |  |  | 93 |
Interest expense |  |  | (815 | ) |  |  | (68 | ) |  |  | (873 | ) |  |  | (126 | )
Other income (expense) - net |  |  | 104 |  |  |  | (35 | ) |  |  | 126 |  |  |  | (49 | )
INCOME BEFORE PROVISION FOR INCOME TAXES |  |  | 1,224 |  |  |  | 2,944 |  |  |  | 2,198 |  |  |  | 4,933 |
Income tax provision |  |  | 102 |  |  |  | 42 |  |  |  | 154 |  |  |  | 83 |
NET INCOME |  | $ | 1,122 |  |  | $ | 2,902 |  |  | $ | 2,044 |  |  | $ | 4,850 |
Preferred stock dividend |  |  | 941 |  |  |  | 1,365 |  |  |  | 2,306 |  |  |  | 4,176 |
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS |  | $ | 181 |  |  | $ | 1,537 |  |  | $ | (262 | ) |  | $ | 674 |
Net income (loss) per common share: basic and diluted |  | $ | 0.00 |  |  | $ | 0.04 |  |  | $ | (0.01 | ) |  | $ | 0.02 |
Weighted-average common shares used to compute basic and diluted loss per share |  |  | 42,493,449 |  |  |  | 42,321,629 |  |  |  | 42,482,758 |  |  |  | 33,118,912 |

See notes to condensed consolidated financial statements.

5

CARECLOUD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025

($ in thousands)

|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
NET INCOME |  | $ | 1,122 |  |  | $ | 2,902 |  |  | $ | 2,044 |  |  | $ | 4,850 |
OTHER COMPREHENSIVE INCOME (LOSS) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Foreign currency translation adjustment (a) |  |  | 26 |  |  |  | (101 | ) |  |  | 54 |  |  |  | (159 | )
COMPREHENSIVE INCOME |  | $ | 1,148 |  |  | $ | 2,801 |  |  | $ | 2,098 |  |  | $ | 4,691 |

(a) |  | No tax effect has been recorded as the Company recorded a valuation allowance against the tax benefit from its foreign currency translation adjustments.

See notes to condensed consolidated financial statements.

6

CARECLOUD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025

($ in thousands, except for number of shares)

|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Loss |  |  | Stock |  |  | Equity |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |  |  |
|  | Preferred Stock Series A |  |  | Preferred Stock Series B |  |  | Common Stock |  |  | Additional Paid-in |  |  | Accumulated |  |  | Other Comprehensive |  |  | Treasury (Common) |  |  | Total Shareholders’ |
|  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Shares |  |  | Amount |  |  | Capital |  |  | Deficit |  |  | Loss |  |  | Stock |  |  | Equity |
Balance - January 1, 2026 |  |  | 984,530 |  |  | $ | 1 |  |  |  | 1,511,372 |  |  | $ | 1 |  |  |  | 43,178,748 |  |  | $ | 43 |  |  | $ | 119,936 |  |  | $ | (55,832 | ) |  | $ | (3,981 | ) |  | $ | (662 | ) |  | $ | 59,506 |
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 922 |  |  |  | - |  |  |  | - |  |  |  | 922 |
Foreign currency translation adjustment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 28 |  |  |  | - |  |  |  | 28 |
Issuance of stock under the equity incentive plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 55,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Stock-based compensation, net of cash settlements |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 63 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 63 |
Preferred stock dividends |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,192 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,192 | )
Balance - March 31, 2026 |  |  | 984,530 |  |  | $ | 1 |  |  |  | 1,511,372 |  |  | $ | 1 |  |  |  | 43,233,748 |  |  | $ | 43 |  |  | $ | 117,807 |  |  | $ | (54,910 | ) |  | $ | (3,953 | ) |  | $ | (662 | ) |  | $ | 58,327 |
Balance - April 1, 2026 |  |  | 984,530 |  |  | $ | 1 |  |  |  | 1,511,372 |  |  | $ | 1 |  |  |  | 43,233,748 |  |  | $ | 43 |  |  | $ | 117,807 |  |  | $ | (54,910 | ) |  | $ | (3,953 | ) |  | $ | (662 | ) |  | $ | 58,327 |
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,122 |  |  |  | - |  |  |  | - |  |  |  | 1,122 |
Foreign currency translation adjustment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 26 |  |  |  | - |  |  |  | 26 |
Issuance of stock under the equity incentive plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 910 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Redemption of Series B Preferred Stock |  |  | - |  |  |  | - |  |  |  | (1,511,372 | ) |  |  | (1 | ) |  |  | - |  |  |  | - |  |  |  | (38,168 | ) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (38,169 | )
Stock-based compensation, net of cash settlements |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 64 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 64 |
Preferred stock dividends |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,968 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,968 | )
Balance - June 30, 2026 |  |  | 984,530 |  |  | $ | 1 |  |  |  | - |  |  | $ | - |  |  |  | 43,234,658 |  |  | $ | 43 |  |  | $ | 75,735 |  |  | $ | (53,788 | ) |  | $ | (3,927 | ) |  | $ | (662 | ) |  | $ | 17,402 |
Balance - January 1, 2025 |  |  | 4,526,231 |  |  | $ | 5 |  |  |  | 1,511,372 |  |  | $ | 1 |  |  |  | 16,997,035 |  |  | $ | 17 |  |  | $ | 121,046 |  |  | $ | (66,630 | ) |  | $ | (4,003 | ) |  | $ | (662 | ) |  | $ | 49,774 |
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,948 |  |  |  | - |  |  |  | - |  |  |  | 1,948 |
Foreign currency translation adjustment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (58 | ) |  |  | - |  |  |  | (58 | )
Conversion of preferred stock and accrued dividends to common stock |  |  | (3,541,701 | ) |  |  | (4 | ) |  |  | - |  |  |  | - |  |  |  | 25,981,248 |  |  |  | 26 |  |  |  | 2,413 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,435 |
Issuance of stock under the equity incentive plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 83,645 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Stock-based compensation, net of cash settlements |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 104 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 104 |
Preferred stock dividends |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (26 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (26 | )
Balance - March 31, 2025 |  |  | 984,530 |  |  | $ | 1 |  |  |  | 1,511,372 |  |  | $ | 1 |  |  |  | 43,061,928 |  |  | $ | 43 |  |  | $ | 123,537 |  |  | $ | (64,682 | ) |  | $ | (4,061 | ) |  | $ | (662 | ) |  | $ | 54,177 |
Balance - April 1, 2025 |  |  | 984,530 |  |  | $ | 1 |  |  |  | 1,511,372 |  |  | $ | 1 |  |  |  | 43,061,928 |  |  | $ | 43 |  |  | $ | 123,537 |  |  | $ | (64,682 | ) |  | $ | (4,061 | ) |  | $ | (662 | ) |  | $ | 54,177 |
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,902 |  |  |  | - |  |  |  | - |  |  |  | 2,902 |
Foreign currency translation adjustment |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (101 | ) |  |  | - |  |  |  | (101 | )
Issuance of stock under the equity incentive plan |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 910 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Stock-based compensation, net of cash settlements |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 100 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 100 |
Preferred stock dividends |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,002 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,002 | )
Balance - June 30, 2025 |  |  | 984,530 |  |  | $ | 1 |  |  |  | 1,511,372 |  |  | $ | 1 |  |  |  | 43,062,838 |  |  | $ | 43 |  |  | $ | 122,635 |  |  | $ | (61,780 | ) |  | $ | (4,162 | ) |  | $ | (662 | ) |  | $ | 56,076 |

For the six months ended June 30, 2026, the Company declared and paid six months of dividends on the Series A Preferred Stock. For the Series B Preferred Stock, the Company declared 18 months and 14 days of dividends and paid 19 months and 14 days of dividends, which included 14 months of dividends in arrears.

For the six months ended June 30, 2025, the Company declared six months of dividends and paid five months of dividends on the Series A and Series B Preferred Stock.

See notes to condensed consolidated financial statements.

7

CARECLOUD, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025

($ in thousands)

|  | 2026 |  |  | 2025 |
OPERATING ACTIVITIES: |  |  |  |  |  |  |  |
Net income |  | $ | 2,044 |  |  | $ | 4,850 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 7,858 |  |  |  | 6,855 |
Lease amortization |  |  | 896 |  |  |  | 901 |
Provision for expected credit losses |  |  | 118 |  |  |  | 169 |
Provision for deferred income taxes |  |  | 50 |  |  |  | - |
Foreign exchange loss |  |  | 15 |  |  |  | 1 |
Interest accretion |  |  | 208 |  |  |  | 219 |
Change in contingent consideration |  |  | 23 |  |  |  | - |
Stock-based compensation expense |  |  | 128 |  |  |  | 219 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | 827 |  |  |  | (958 | )
Contract asset |  |  | 238 |  |  |  | 411 |
Inventory |  |  | 36 |  |  |  | 51 |
Other assets |  |  | 73 |  |  |  | (838 | )
Accounts payable and other liabilities |  |  | (2,146 | ) |  |  | 377 |
Deferred revenue |  |  | 316 |  |  |  | 264 |
Net cash provided by operating activities |  |  | 10,684 |  |  |  | 12,521 |
INVESTING ACTIVITIES: |  |  |  |  |  |  |  |
Purchases of property and equipment |  |  | (937 | ) |  |  | (1,786 | )
Capitalized software and other intangible assets |  |  | (1,620 | ) |  |  | (1,677 | )
Payment for acquisitions |  |  | (681 | ) |  |  | (40 | )
Net cash used in investing activities |  |  | (3,238 | ) |  |  | (3,503 | )
FINANCING ACTIVITIES: |  |  |  |  |  |  |  |
Preferred stock dividends paid |  |  | (6,436 | ) |  |  | (3,317 | )
Payment of contingent consideration |  |  | (618 | ) |  |  | - |
Payment of tax withholding on stock issued to employees |  |  | (1 | ) |  |  | (22 | )
Proceeds from term loan |  |  | 39,739 |  |  |  | - |
Repayments of notes payable and term loan |  |  | (1,191 | ) |  |  | (355 | )
Redemption of Series B Preferred Stock |  |  | (38,169 | ) |  |  | - |
Proceeds from line of credit |  |  | 9,000 |  |  |  | - |
Net cash provided by (used in) financing activities |  |  | 2,324 |  |  |  | (3,694 | )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND RESTRICTED CASH |  |  | 8 |  |  |  | (29 | )
NET INCREASE IN CASH AND RESTRICTED CASH |  |  | 9,778 |  |  |  | 5,295 |
CASH AND RESTRICTED CASH - Beginning of the period |  |  | 3,617 |  |  |  | 5,145 |
CASH - End of the period |  | $ | 13,395 |  |  | $ | 10,440 |
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES: |  |  |  |  |  |  |  |
Conversion of Series A Preferred Stock and accrued dividends to common stock |  | $ | - |  |  | $ | 2,435 |
Dividends declared, not paid |  | $ | 392 |  |  | $ | 714 |
SUPPLEMENTAL INFORMATION - Cash paid during the period for: |  |  |  |  |  |  |  |
Income taxes |  | $ | 158 |  |  | $ | 144 |
Interest |  | $ | 517 |  |  | $ | 44 |

See notes to condensed consolidated financial statements.

8

CARECLOUD, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026

AND 2025 (UNAUDITED)

1. | ORGANIZATION AND BUSINESS

CareCloud, Inc., (together with its consolidated subsidiaries, “CareCloud,” the “Company,” “we,” “us” and/or “our”) is a leading provider of technology-enabled services and generative AI solutions. We provide technology-enabled revenue cycle management and a full suite of proprietary cloud-based solutions to healthcare providers, from small practices to enterprise medical groups, hospitals, and health systems throughout the United States. Healthcare organizations today operate in highly complex and regulated environments. Our suite of technology-enabled solutions helps our clients increase financial and operational performance, streamline clinical workflows, and improve the patient experience.

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

During August 2025, the Company formed CareCloud Holdings, Inc (“Holdings”), as an indirect subsidiary. Holdings purchased certain assets and assumed certain liabilities of Medsphere Systems Corporation (“MSC”). MSC was in the business of providing healthcare IT software and related services to the inpatient and ambulatory market. During October 2025, the Company formed N884AM Holdings, Inc. to acquire an aircraft which is used primarily for maintaining key client relationships as well as for sales and marketing activities. During May 2026, the Company formed Empower Healthcare & Compliance, Inc. (“Empower”), as an indirect subsidiary. Empower purchased certain assets of Empower Healthcare & Compliance Partners, LLC (“EHCP”). EHCP was a full service healthcare compliance and advisory firm. (See Note 4.)

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

2. | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

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

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

In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40). This update makes targeted improvements to Subtopic 350-40 to increase the operability of the recognition guidance by removing all references to software development project stages so that the guidance is neutral to different software development methods, including methods that entities may use to develop software in the future. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period. The Company is in the process of determining if this update will have a significant impact on the consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270). This update improves the guidance in Topic 270, Interim Reporting, by improving the navigability of the required interim disclosures and clarifying when that guidance is applicable. The amendments in this update are effective for all entities that provide interim financial statements and notes in accordance with generally accepted accounting principles for interim reporting periods within annual reporting periods beginning after December 15, 2027. The amendments in this update can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The expected impact would only be to the financial statement disclosures.

10

In December 2025, the FASB issued ASU 2025-12, Codification Improvements. This project facilitates Codification updates for a broad range of Topics arising from technical corrections, unintended application of the Codification, clarifications, and other minor improvements. The Board decided that the types of issues that it will consider through this project are improvements that are not expected to have a significant effect on current accounting practice or result in significant costs to most entities. The amendments in this Update are effective for all entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. The Company does not expect this update to have a material impact on the consolidated financial statements.

3. | PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

|  | June 30, 2026 |  |  | December 31, 2025 |
|  | ($ in thousands) |
Prepayments to vendors |  | $ | 2,054 |  |  | $ | 1,814 |
Prepaid credit card |  |  | 17 |  |  |  | 154 |
Prepaid insurance |  |  | 170 |  |  |  | 610 |
Prepaid commissions |  |  | 115 |  |  |  | 141 |
Other |  |  | 402 |  |  |  | 153 |
Total |  | $ | 2,758 |  |  | $ | 2,872 |

4. | ACQUISITIONS

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

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

SCHEDULE OF ALLOCATION OF PURCHASE PRICE

|  | ($ in thousands) |
Cash |  | $ | 681 |
Notes payable |  |  |  |
Contingent escrow |  |  |  |
Contingent consideration |  |  | 151 |
Total purchase price |  | $ | 832 |

SCHEDULE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED IN BUSINESS ACQUISITION

|  | ($ in thousands) |
Contract asset |  |  |  |
Customer relationships |  | $ | 600 |
Goodwill |  |  | 400 |
Accounts receivable |  |  |  |
Property and equipment |  |  |  |
Accounts payable |  |  |  |
Accrued compensation |  |  |  |
Deferred revenue |  |  | (168 | )
Technology acquired |  |  |  |
Trademarks |  |  |  |
Total preliminary purchase price allocation |  | $ | 832 |

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

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The Company performed the valuation of the acquired assets. The weighted-average amortization period of the acquired intangible asset is approximately three years. The Company expects to finalize the valuation and complete the purchase price allocation during the third quarter of this year.

Revenue earned from the clients obtained from the Empower acquisition was approximately $262,000 during the three months ended June 30, 2026.

Effective October 1, 2025 (the “MAP App Closing Date”), the Company entered into an Asset Purchase Agreement (the “APA”) with the Healthcare Financial Management Association (the “HFMA”), an Illinois not-for-profit corporation, to acquire MAP App. The acquisition has been accounted for as a business combination. Under the APA, the Company paid $467,817 (the “Closing Payment”) as consideration plus potential earnouts. The Company will pay an additional cash payment (the “Earnout Payment”) equal to the aggregate net revenue earned by the Company during the twelve-month period beginning ninety days from the MAP App Closing Date (the “Initial Earnout Period”) from (i) customers who were MAP App subscribers as of the MAP App Closing Date and remain active subscribers, in good standing, throughout the Initial Earnout Period (“Acquired MAP Accounts”), (ii) prospective customers included in the MAP App pipeline as of the MAP App Closing Date (“Pipeline MAP Accounts”) and (iii) new customers resulting from the HFMA’s efforts that are neither Acquired MAP Accounts nor Pipeline MAP Accounts (“Ramp-up Customers”). During the thirty-six month period beginning immediately after the Initial Earnout Period, the Company will make additional quarterly payments to the HFMA in amounts equal to 5% of the aggregate net revenue earned during the preceding quarter from all Acquired MAP Accounts, Pipeline MAP Accounts and Ramp-up Customers and 20% of the aggregate net revenue earned during the preceding quarter from all newly signed Pipeline MAP Accounts procured in connection with the agreement. The Earnout Payment will be reduced by the sum of the Closing Payment and $353,000, the deferred revenue amount assumed as part of the acquisition.

MAP App is an industry-leading tool for benchmarking and measuring revenue cycle management performance, which was developed by the HFMA and is used by top hospitals and healthcare organizations nationwide.

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

SCHEDULE OF ALLOCATION OF PURCHASE PRICE

|  | ($ in thousands) |
Cash |  | $ | 468 |
Notes payable |  |  |  |
Contingent escrow |  |  |  |
Contingent consideration |  |  | 150 |
Total purchase price |  | $ | 618 |

SCHEDULE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED IN BUSINESS ACQUISITION

|  | ($ in thousands) |
Customer relationships |  | $ | 587 |
Technology acquired |  |  | 42 |
Trademark |  |  | 10 |
Goodwill |  |  | 332 |
Deferred revenue |  |  | (353 | )
Total purchase price allocation |  | $ | 618 |

The fair value of customer relationships was based on the estimated discounted cash flows generated by these intangibles. The goodwill represents the Company’s ability to develop software relationships with hospitals to support Revenue Cycle Management (“RCM”) growth. The goodwill from this acquisition is deductible ratably for income tax purposes over fifteen years. It was estimated that the probable future payments required under the APA will be approximately $150,000 which has been recorded as part of the purchase price allocation as contingent consideration.

The Company performed the valuation of the acquired assets and the contingent consideration. The purchase price allocation was finalized this quarter. The weighted-average amortization period of the acquired intangible assets is approximately three years.

Revenue earned from the clients obtained from the MAP App acquisition was approximately $167,000 and $358,000 during the three and six months ended June 30, 2026, respectively.

12

The acquisition reflects both the HFMA’s desire to partner with a leader in healthcare technology to expand MAP App’s core capabilities and CareCloud’s strategy to expand its Software-as-a-Service (“SaaS”) based ecosystem with best-in-class tools that complement its AI-powered revenue cycle platform.

On August 22, 2025 (the “Medsphere Closing Date”), Holdings entered into and closed on an APA with Medsphere, (the “Seller”). The acquisition was accounted for as a business combination. Pursuant to the APA, Holdings acquired certain assets and assumed certain liabilities of Seller, which is in the business of providing healthcare IT software and related services primarily to the U.S. inpatient and ambulatory market.

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

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

SCHEDULE OF ALLOCATION OF PURCHASE PRICE

|  | ($ in thousands) |
Cash |  | $ | 7,750 |
Notes payable |  |  | 8,250 |
Contingent escrow |  |  | 500 |
Total purchase price |  | $ | 16,500 |

SCHEDULE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED IN BUSINESS ACQUISITION

|  | ($ in thousands) |
Accounts receivable |  | $ | 2,166 |
Contract asset |  |  | 52 |
Property and equipment |  |  | 240 |
Customer relationships |  |  | 6,210 |
Technology acquired |  |  | 1,810 |
Trademarks |  |  | 250 |
Goodwill |  |  | 11,880 |
Accounts payable |  |  | (1,734 | )
Accrued compensation |  |  | (544 | )
Deferred revenue |  |  | (3,830 | )
Total purchase price allocation |  | $ | 16,500 |

The fair value of the accounts receivable was based on actual collections subsequent to the acquisition. The fair value of the contract asset was based on the expected revenue earned by Medsphere as of the Medsphere Closing Date. The fair value of customer relationships was based on the estimated discounted cash flows generated by these intangibles. The goodwill represents the Company’s ability to expand in the inpatient and ambulatory market and operational synergies that we expect to achieve that would not be available to other market participants. The goodwill from this acquisition is deductible ratably for income tax purposes over fifteen years. The acquired accounts receivable is recorded at fair value, which represents amounts that have been subsequently paid or are expected to be paid by clients. The fair value of the technology was based on the present value of the expected after-tax royalty savings. The fair value of the liabilities assumed was based on actual amounts owed.

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

Revenue earned from the clients obtained from the Medsphere acquisition was approximately $6.8 million and $13.6 million during the three and six months ended June 30, 2026, respectively. The contingent escrow was included in the restricted cash balance at December 31, 2025 and was subsequently paid.

13

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

On April 1, 2025 (the “RevNu Closing Date”), the Company entered into an APA with Gratius Enterprises, Inc., doing business as RevNu Medical Management (“RevNu”), pursuant to which the Company acquired certain assets of RevNu. The acquisition has been accounted for as a business combination. Under the APA, the Company is obligated to make quarterly payments equal to twenty percent (20%) of the revenue generated from the acquired RevNu client accounts for a period of forty-two (42) months following the RevNu Closing Date (the “RevNu Quarterly Payments”). The total purchase price is contingent upon future revenue performance and includes the estimated fair value of the RevNu Quarterly Payments. In the event that the service agreement with a specified customer is terminated, the Company will have no further obligation to make additional payments under the APA. For the quarter ended June 30, 2026, the quarterly payment due to RevNu was approximately $59,000.

RevNu was in the business of providing audiology and hearing aid billing/revenue cycle IT solutions and related services to hearing healthcare providers/practices. The total consideration for this acquisition consisted of contingent consideration of approximately $565,000.

The purchase price allocation of RevNu is summarized as follows:

SCHEDULE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED IN BUSINESS ACQUISITION

|  | ($ in thousands) |
Contract asset |  | $ | 14 |
Customer relationships |  |  | 519 |
Goodwill |  |  | 32 |
Total purchase price allocation |  | $ | 565 |

The fair value of the contract asset was based on the expected revenue earned by RevNu as of the RevNu Closing Date. The fair value of customer relationships was based on the estimated discounted cash flows generated by these intangibles. The goodwill represents the Company’s ability to expand in the audiology and hearing aid market. The goodwill from this acquisition is deductible ratably for income tax purposes over fifteen years. It was estimated that the probable payments required under the APA will be approximately $565,000 which has been recorded as part of the purchase price allocation as contingent consideration.

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

Revenue earned from the clients obtained from the RevNu acquisition was approximately $316,000 and $616,000 during the three and six months ended June 30, 2026.

The RevNu acquisition added additional clients to the Company’s customer base and, similar to previous acquisitions, broadened the Company’s presence in the healthcare information technology industry through expansion of its customer base and by increasing available customer relationship resources and specialized trained staff.

14

Pro forma financial information (Unaudited)

The unaudited pro forma information below represents the Company’s condensed consolidated results of operations as if the Empower, MAP App, Medsphere, RevNu and one other small acquisition occurred on January 1, 2025. The pro forma information has been included for comparative purposes and is not indicative of the results of operations the Company would have had if the acquisitions occurred on the above date, nor is it necessarily indicative of future results. The unaudited pro forma information reflects material, non-recurring pro forma adjustments directly attributable to the business combinations. The difference between the actual net revenue and the pro forma net revenue is approximately $9.2 million and $19.2 million for the three and six months ended June 30, 2025, and is reflected as a pro forma adjustment below. This difference primarily represents revenue recorded by Empower, MAP App, Medsphere, RevNu and one other acquisition. The difference between the actual net revenue and the pro forma net revenue is approximately $491,000 and $1.5 million for the three and six months ended June 30, 2026. Other differences arise primarily from amortizing purchased intangibles using the double declining balance method, depreciating acquired fixed assets, adjusting the interest expense and reversing debt exit fees and the goodwill amortization and impairment.

SCHEDULE OF PRO FORMA FINANCIAL INFORMATION

|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | ($ in thousands, except per share amounts) |
Net revenue |  | $ | 32,371 |  |  | $ | 36,531 |  |  | $ | 64,624 |  |  | $ | 74,181 |
Net income |  | $ | 1,530 |  |  | $ | 905 |  |  | $ | 3,065 |  |  | $ | 1,795 |
Net income (loss) attributable to common shareholders |  | $ | 589 |  |  | $ | (460 | ) |  | $ | 759 |  |  | $ | (2,381 | )
Net income (loss) per common share - basic and diluted |  | $ | 0.01 |  |  | $ | (0.01 | ) |  | $ | 0.02 |  |  | $ | (0.07 | )

5. | GOODWILL AND INTANGIBLE ASSETS-NET

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

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

SCHEDULE OF CHANGES TO CARRYING AMOUNT OF GOODWILL

|  | Six Months Ended |  |  | Year Ended |
|  | June 30, 2026 |  |  | December 31, 2025 |
|  | ($ in thousands) |
Beginning gross balance |  | $ | 31,442 |  |  | $ | 19,186 |
Additions |  |  | 400 |  |  |  | 12,256 |
Adjustment |  |  | (7 | ) |  |  | - |
Ending gross balance |  | $ | 31,835 |  |  | $ | 31,442 |

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

SCHEDULE OF INTANGIBLE ASSETS

|  | June 30, 2026 |  |  | December 31, 2025 |
|  | ($ in thousands) |
Contracts and relationships acquired |  | $ | 55,573 |  |  | $ | 54,973 |
Capitalized software |  |  | 40,005 |  |  |  | 38,329 |
Non-compete agreements |  |  | 1,236 |  |  |  | 1,236 |
Other intangible assets |  |  | 10,529 |  |  |  | 10,529 |
Total intangible assets |  |  | 107,343 |  |  |  | 105,067 |
Less: Accumulated amortization |  |  | 92,414 |  |  |  | 86,099 |
Intangible assets - net |  | $ | 14,929 |  |  | $ | 18,968 |

Capitalized software represents payroll and development costs incurred for internally developed software. Other intangible assets primarily represent purchased intangibles. Amortization expense for the three months ended June 30, 2026 and 2025 was approximately $3.0 million and $2.8 million, respectively, and for the six months ended June 30, 2026 and 2025 was approximately $6.3 million and $5.6 million, respectively. The weighted-average amortization period remaining is approximately two years.

15

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

SCHEDULE OF INTANGIBLE ASSETS, FUTURE AMORTIZATION EXPENSE

Years ending June 30, |  | ($ in thousands) |
2026 (six months) |  | $ | 4,316 |
2027 |  |  | 5,775 |
2028 |  |  | 3,395 |
2029 |  |  | 1,293 |
2030 |  |  | 150 |
Total |  | $ | 14,929 |

6. | NET INCOME (LOSS) PER COMMON SHARE

The following table reconciles the weighted-average shares outstanding for basic and diluted net income (loss) per share for the three and six months ended June 30, 2026 and 2025:

SCHEDULE OF RECONCILIATION OF WEIGHTED-AVERAGE SHARES OUTSTANDING FOR BASIC AND DILUTED NET LOSS PER SHARE

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | ($ in thousands, except share and per share amounts) |
Basic and Diluted: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) attributable to common shareholders |  | $ | 181 |  |  | $ | 1,537 |  |  | $ | (262 | ) |  | $ | 674 |
Weighted-average common shares used to compute basic and diluted income (loss) per share |  |  | 42,493,449 |  |  |  | 42,321,629 |  |  |  | 42,482,758 |  |  |  | 33,118,912 |
Net income (loss) attributable to common shareholders per share - basic and diluted |  | $ | 0.00 |  |  | $ | 0.04 |  |  | $ | (0.01 | ) |  | $ | 0.02 |

The net income (loss) attributable to common shareholders includes the preferred stock dividend amounts earned and declared for the three and six months ended June 30, 2026 of approximately $941,000 and $2.3 million, respectively, and the preferred stock dividend amounts earned and declared for the three and six months ended June 30, 2025 of approximately $1.4 million and $4.2 million, respectively. The dividend payable at June 30, 2026 and December 31, 2025 in the condensed consolidated balance sheets represents dividends declared, but not paid.

For the three months ended June 30, 2026, 105,000 unvested restricted stock units (“RSUs”), as discussed in Note 14, were included in the computation of diluted earnings per share; however, their inclusion did not affect diluted earnings per share. For the three and six months ended June 30, 2025, unvested RSUs were also included in the computation earnings in the above calculation but did not affect diluted earnings per share. For the six months ended June 30, 2026, 105,000 unvested RSUs were excluded from the computation of diluted earnings per share as they were antidilutive.

7. | ACCRUED EXPENSES AND DEBT

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

SCHEDULE OF ACCRUED EXPENSES

|  | June 30, 2026 |  |  | December 31, 2025 |
|  | ($ in thousands) |
Accrued expenses |  | $ | 4,211 |  |  | $ | 3,569 |
Payable to managed practices |  |  | 1,164 |  |  |  | 2,128 |
Taxes and other |  |  | 568 |  |  |  | 273 |
Total |  | $ | 5,943 |  |  | $ | 5,970 |

Bank Debt — The Company had a revolving line of credit with Silicon Valley Bank, a division of First Citizens Bank & Trust Company (“SVB”) which the Company voluntarily terminated on August 18, 2025. The SVB credit facility was a secured revolving line of credit with interest at the prime rate plus 1.5%. The debt was secured by all of the Company’s domestic assets and 65% of the shares in its offshore subsidiaries. Interest costs on the line of credit, which are included in interest expense, were approximately $13,000 and $25,000 for the three and six months ended June 30, 2025.

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

On September 3, 2025, the Company entered into an agreement (the “Agreement”) with Provident Bank (“Provident”) whereby Provident provided the Company with an available line of credit of $10 million. The facility was secured by, among other things, a first lien security interest in substantially all of the assets and other property of the Company. The interest rate of the facility was an adjustable rate equal to the margin (300 basis points) over an independent index which is equal to the Secured Overnight Financing Rate (“SOFR”). There was no cost related to the line of credit for the three and six months ended June 30, 2026. The Agreement contained various covenants and conditions governing the revolving line of credit including an initial commitment fee of $35,000 and an annual fee of $35,000 thereafter.

Upon entering into the Agreement, the Company borrowed approximately $8.3 million on its line of credit with Provident to satisfy the obligation to Wells Fargo incurred in connection with the Medsphere acquisition. These funds were repaid to Provident by December 31, 2025. The Agreement was terminated by the Company in April 2026.

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

On April 13, 2026, the Company entered into a credit agreement providing for a $40 million term loan and a $10 million revolving line of credit (the “Credit Facility”) with Citizens Bank, N.A. (“Citizens”) and Provident. The Credit Facility is secured by all of the Company’s assets and 65% of the shares in its offshore subsidiaries. It is also secured by a pledge of Company common stock held by the Company’s Executive Chairman. The term loan facility and the revolving line of credit each mature on the fourth anniversary of the closing date. The term loan amortizes in equal monthly principal installments beginning June 1, 2026. Borrowings under the Credit Facility bear interest at rates based on SOFR plus 3.5% for the term loan and SOFR plus 2.5% for the line of credit. The Credit Facility contains customary affirmative and negative covenants, including financial covenants, and customary events of default. Proceeds from the Credit Facility are being used for general corporate purposes, including the redemption of the Company’s outstanding Series B Preferred Stock which occurred on May 15, 2026. At the time of closing, the Company borrowed approximately $49 million under the Credit Facility. Approximately $41.6 million of the funds borrowed under the Credit Facility were used to fund the Series B Preferred Stock redemption, including the unpaid dividends. As of June 30, 2026, the outstanding balance of the term loan was approximately $39.2 million and $9 million was drawn on the line of credit. The Company was in compliance with all covenants.

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

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

SCHEDULE OF OUTSTANDING TERM LOAN PAYABLE AND OTHER OBLIGATION

|  | June 30, 2026 |  |  | December 31, 2025 |
|  | ($ in thousands) |
Current obligations: |  |  |  |  |  |  |  |
Term loan |  | $ | 10,000 |  |  | $ | - |
Aircraft loan |  |  | 664 |  |  |  | 642 |
Vehicle financing |  |  | 92 |  |  |  | 86 |
Total current obligations |  | $ | 10,756 |  |  | $ | 728 |
Long-term obligations: |  |  |  |  |  |  |  |
Term loan |  | $ | 29,167 |  |  | $ | - |
Aircraft loan |  |  | - |  |  |  | 338 |
Vehicle financing |  |  | 56 |  |  |  | 103 |
Total non-current obligations |  | $ | 29,223 |  |  | $ | 441 |
Total obligations |  | $ | 39,979 |  |  | $ | 1,169 |

The Company maintains cash balances at Provident in excess of the FDIC insurance coverage limits. The Company performs periodic evaluations of the relative credit standing of Provident to ensure its credit worthiness. As of June 30, 2026 and December 31, 2025, the Company held cash of approximately $1.3 million and $1.1 million, respectively, in the name of its subsidiaries at banks in Pakistan and Sri Lanka. The banking systems in these countries do not provide deposit insurance coverage. The Company has not experienced any losses on its cash accounts.

8. | LEASES

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

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

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

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

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The components of lease expense were as follows:

SCHEDULE OF LEASE EXPENSE

|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | ($ in thousands) |
Operating lease cost |  | $ | 525 |  |  | $ | 522 |  |  | $ | 1,065 |  |  | $ | 1,098 |
Short-term lease cost |  |  | 19 |  |  |  | - |  |  |  | 19 |  |  |  | 5 |
Variable lease cost |  |  | 2 |  |  |  | 4 |  |  |  | 5 |  |  |  | 11 |
Total - net lease cost |  | $ | 546 |  |  | $ | 526 |  |  | $ | 1,089 |  |  | $ | 1,114 |

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

Supplemental balance sheet information related to leases is as follows:

SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES

|  | June 30, 2026 |  |  | December 31, 2025 |
|  | ($ in thousands) |
Operating leases: |  |  |  |  |  |  |  |
Operating lease ROU assets, net |  | $ | 4,864 |  |  | $ | 3,106 |
Current operating lease liabilities |  | $ | 1,573 |  |  | $ | 927 |
Non-current operating lease liabilities |  |  | 3,462 |  |  |  | 2,187 |
Total operating lease liabilities |  | $ | 5,035 |  |  | $ | 3,114 |
Operating leases: |  |  |  |  |  |  |  |
ROU assets |  | $ | 5,762 |  |  | $ | 4,876 |
Asset lease expense |  |  | (896 | ) |  |  | (1,767 | )
Foreign exchange loss |  |  | (2 | ) |  |  | (3 | )
ROU assets, net |  | $ | 4,864 |  |  | $ | 3,106 |
Weighted average remaining lease term (in years): |  |  |  |  |  |  |  |
Operating leases |  |  | 5.2 |  |  |  | 6.1 |
Weighted average discount rate: |  |  |  |  |  |  |  |
Operating leases |  |  | 7.1 | % |  |  | 8.5 | %

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

SCHEDULE OF SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION RELATED TO LEASES

|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | ($ in thousands) |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating cash flows from operating leases |  | $ | 490 |  |  | $ | 521 |  |  | $ | 1,018 |  |  | $ | 1,082 |
ROU assets obtained in exchange for lease liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating leases, excluding terminations |  | $ | 637 |  |  | $ | 385 |  |  | $ | 2,656 |  |  | $ | 831 |

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Maturities of lease liabilities are as follows:

SCHEDULE OF MATURITIES OF LEASE LIABILITIES

Operating leases - Years ending December 31, |  | ($ in thousands) |
2026 (six months) |  | $ | 1,057 |
2027 |  |  | 1,478 |
2028 |  |  | 1,007 |
2029 |  |  | 616 |
2030 |  |  | 613 |
Thereafter |  |  | 1,188 |
Total lease payments |  |  | 5,959 |
Less: imputed interest |  |  | (924 | )
Total lease obligations |  |  | 5,035 |
Less: current obligations |  |  | 1,573 |
Long-term lease obligations |  | $ | 3,462 |

The Company leases certain apartments which are either subleased to others or serve as temporary housing for visiting employees. The sublease agreements are currently on a month-to-month basis and are considered operating leases. For the three and six months ended June 30, 2026, the Company received approximately $9,000 and $18,000, respectively, in sublease income. For the three and six months ended June 30, 2025, the Company received sublease income of approximately $3,000 and $13,000, respectively.

9. | COMMITMENTS AND CONTINGENCIES

Legal Proceedings — A former customer had a dispute with the Company that was based on services before and after the account was acquired in an acquisition. A complaint was filed in Massachusetts State Court, Essex County in February 2018. Under the terms of the purchase agreement, the Company’s liability, if any, was solely and expressly limited to damages related to its handling of the account at issue. The parties participated in formal mediation and at that time, Plaintiff’s starting settlement demand was over $2 million. The mediation was not successful. The Company made an offer of $100,000 in December 2024 to settle the suit, which was accepted. The settlement amount was recorded in accrued expenses at December 31, 2024 in the condensed consolidated balance sheet. A settlement agreement with mutual releases was signed by the parties in January 2025 and payment was made in February 2025.

A dispute occurred with a former customer regarding previous services rendered and they filed a complaint in New York Supreme Court, Onondaga County in January 2024. During settlement communications, Plaintiff’s initial settlement demand was over $2.5 million. During ongoing settlement communications, the Company made an offer of $29,000 in March 2025, which was accepted. A settlement agreement with mutual releases was signed by the parties in May 2025 and payment was made in June 2025.

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

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

To date, multiple class action complaints were filed against the Company alleging personal information was compromised in connection with the security incident. In June 2026, the United States District Court for the Southern District of Florida consolidated the actions, and the plaintiffs filed a consolidated amended complaint shortly thereafter. The Company intends to defend the matter vigorously and believes that its available cybersecurity insurance coverage is likely to be sufficient for the losses it currently anticipates in connection with the matter, subject to applicable policy terms, limits, retentions, exclusions and coverage determinations. We believe costs incurred in connection with the incident, including the forensic investigation, remediation, notification, litigation, and legal costs, will be reimbursed by the Company’s cybersecurity insurance carrier, other than the Company’s $100,000 retention.

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

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10. | RELATED PARTIES

The Company had sales to a related party, a physician who is the wife of the Executive Chairman. Revenues from this customer were approximately $63,000 and $31,000 for the three months ended June 30, 2026 and 2025, respectively, and approximately $120,000 and $51,000 for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026 and December 31, 2025, the accounts receivable balance due from this customer was approximately $21,000 and $15,000, respectively, and is included in accounts receivable - net in the condensed consolidated balance sheets.

The Company leases its corporate office in New Jersey, temporary housing for its foreign visitors, a storage facility, its operations center in Bagh, Pakistan and an apartment for temporary housing in Dubai, the UAE, from the Executive Chairman. The related party rent expense for the three months ended June 30, 2026 and 2025 was approximately $72,000 and $71,000, respectively, and was approximately $144,000 and $142,000 for the six months ended June 30, 2026 and 2025, respectively, and is included in direct operating costs, general and administrative expense, selling and marketing expense and research and development expense in the condensed consolidated statements of operations. During the six months ended June 30, 2026 and 2025, the Company spent approximately $671,000 and $838,000, respectively, to upgrade the related party leased facilities. The 2025 expenditures were primarily related to the expansion of the Company’s AI Center. Current assets-related party in the condensed consolidated balance sheets includes security deposits related to the leases of the Company’s corporate offices in the amount of approximately $16,000 as of both June 30, 2026 and December 31, 2025. The Company also leases two facilities used for temporary housing from a management employee for approximately $6,900 per month.

Included in the ROU asset at June 30, 2026 is approximately $384,000 applicable to the related party leases. Included in the current and non-current operating lease liability at June 30, 2026 is approximately $253,000 and $128,000, respectively, applicable to the related party leases. Included in the ROU asset at December 31, 2025 is approximately $430,000 applicable to the related party leases. Included in the current and non-current operating lease liability at December 31, 2025 is approximately $202,000 and $226,000, respectively, applicable to the related party leases.

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

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Effective January 9, 2024, and as amended February 12, 2024, the Company entered into a consulting agreement with an entity owned and controlled by a member of its Board of Directors to provide investor relations and other services as requested. The consulting agreement was cancelable with ten days’ notice. This agreement was terminated by the Company effective February 22, 2026. No expense was recorded under this agreement for the six months ended June 30, 2026. The expense under this agreement was approximately $3,000 and $11,000 for the three and six months ended June 30, 2025, respectively.

During 2020, a New Jersey corporation, talkMD Clinicians, PA (“talkMD”), was formed by the wife of the Executive Chairman, who is a licensed physician, to provide telehealth services. talkMD was determined to be a variable interest entity (“VIE”) for financial reporting purposes because the entity will be controlled by the Company. As of June 30, 2026, talkMD had not yet commenced operations. Cumulatively, the Company has paid approximately $7,000 on behalf of talkMD for income taxes.

11. | RESTRUCTURING COSTS

In October 2023, the Company committed to effectively align resources with business priorities and improve profitability through a reduction in the workforce for the Healthcare IT segment. In addition, the Company instituted certain other expense reductions. There were no restructuring costs during the six months ended June 30, 2026 and approximately $23,000 and $137,000 was incurred during the three and six months ended June 30, 2025, respectively. The expense associated with the restructuring is included in restructuring costs in the 2025 condensed consolidated statement of operations. These restructuring expenses primarily consisted of one-time termination benefits, including, but not limited to, severance payments and healthcare benefits.

12. | SHAREHOLDERS’ EQUITY

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

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

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

On March 6, 2025, the Board of Directors elected to exercise its conversion rights, which provided for the conversion of each share of Series A Preferred Stock into 7.3358 shares of common stock, inclusive of all accumulated and unpaid dividends. Dividends on the converted shares of Series A Preferred Stock ceased to accrue as of the conversion date. Individual shareholders who, on the exchange date, owned at least 100,000 shares of Series A Preferred Stock did not have their shares automatically converted to common stock so long as they were held by the Company’s transfer agent, unless they consented to the Conversion. There were 3,541,701 shares of Series A Preferred Stock converted at that time and 984,530 shares of Series A Preferred Stock remain outstanding. Due to the Conversion, the monthly cash dividends were reduced to approximately $455,000 per month. As a result of the Conversion, the Company delisted the Series A Preferred Stock from the Nasdaq Global Market.

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

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

At June 30, 2026, the Company had total dividends due of approximately $2.7 million, which represents the total of declared and accumulated dividends due to the Series A preferred shareholders of record on June 30, 2026. For the three months ended June 30, 2026, the Company declared and paid three months of dividends on the Series A Preferred Stock ($0.182 per share and $0.547 per share for the quarter). For the six months ended June 30, 2026, the Company declared and paid six months of dividends on the Series A Preferred Stock. The dividend payable amount in the condensed consolidated balance sheets represent dividends declared. The Company plans to continue declaring monthly dividends on the Series A Preferred Stock.

13. | REVENUE

Introduction

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. All revenue is recognized as our performance obligations are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under ASC 606. The Company recognizes revenue when the revenue cycle management services begin on the medical billing claims, which is generally upon receipt of the claim from the provider. For many services, the Company recognizes revenue as a percentage of the amount the customer collects on the medical billing claims. The Company’s software is utilized at the time the provider sees the patient, and the Company estimates the value of the consideration it will earn over the remaining contractual period as services are provided and recognizes the fees over the term; this estimation involves predicting the amounts our clients will ultimately collect associated with the services they provided. Certain significant estimates, such as payment-to-charge ratios, effective billing rates and the estimated contractual payment periods are required to measure revenue cycle management revenue under the standard.

Most of our current contracts with customers contain a single performance obligation. For contracts where we provide multiple services, such as where we perform multiple ancillary services, each service represents its own performance obligation. The standalone selling prices are based on the contractual price for the service.

We apply the portfolio approach as permitted by ASC 606 as a practical expedient to contracts with similar characteristics and we use estimates and assumptions when accounting for those portfolios. Our contracts generally include standard commercial payment terms. We have no significant obligations for refunds, warranties or similar obligations and our revenue does not include taxes collected from our customers.

Disaggregation of Revenue from Contracts with Customers

We derive revenue from five primary sources: (1) technology-enabled business solutions, (2) professional services, (3) printing and mailing services, (4) group purchasing services and (5) medical practice management services.

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

SCHEDULE OF DISAGGREGATION OF REVENUE

|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | ($ in thousands) |
Healthcare IT: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Technology-enabled business solutions |  | $ | 24,010 |  |  | $ | 18,991 |  |  | $ | 47,042 |  |  | $ | 36,696 |
Professional services |  |  | 3,199 |  |  |  | 4,076 |  |  |  | 6,343 |  |  |  | 9,967 |
Printing and mailing services |  |  | 771 |  |  |  | 802 |  |  |  | 1,872 |  |  |  | 1,681 |
Group purchasing services |  |  | 214 |  |  |  | 208 |  |  |  | 441 |  |  |  | 375 |
Medical Practice Management: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Medical practice management services |  |  | 3,686 |  |  |  | 3,300 |  |  |  | 7,452 |  |  |  | 6,290 |
Total |  | $ | 31,880 |  |  | $ | 27,377 |  |  | $ | 63,150 |  |  | $ | 55,009 |
Revenue |  | $ | 31,880 |  |  | $ | 27,377 |  |  | $ | 63,150 |  |  | $ | 55,009 |

Technology-enabled business solutions:

Revenue derived on an on-going basis from our technology-enabled solutions, which typically include revenue cycle management services, is billed as a percentage of payments collected by our customers. The fee for our services often includes the ability to use our electronic health records (“EHR”) and practice management software as well as RCM as part of the bundled fee. The SaaS component is not a material portion of the contract compared to the stand-alone value of RCM.

Technology-assisted revenue cycle management services are the recurring process of submitting and following up on claims with health insurance companies in order for the healthcare providers to receive payment for the services they rendered. The Company typically invoices customers on a monthly basis based on the actual collections received by its customers and the agreed-upon rate in the sales contract. The fee for these services typically includes use of practice management software and related tools (on a SaaS basis), electronic health records (on a SaaS basis), medical billing services and use of mobile health solutions. We consider the services to be one performance obligation since the promises are not distinct in the context of the contract. The performance obligation consists of a series of distinct services that are substantially the same and have the same periodic pattern of transfer to our customers.

In many cases, our clients may terminate their agreements with 90 days’ notice without cause, thereby limiting the term in which we have enforceable rights and obligations, although this time period can vary between clients. Our payment terms are normally net 30 days. Although our contracts typically have stated terms of one or more years, under ASC 606 our contracts are considered month-to-month and accordingly, there is no financing component.

For the majority of our revenue cycle management contracts, the total transaction price is variable because our obligation is to process an unknown quantity of claims, as and when requested by our customers over the contract period. When a contract includes variable consideration, we evaluate the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, we include variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with variable consideration is subsequently resolved. Estimates to determine variable consideration such as payment-to-charge ratios, effective billing rates, and the estimated contractual payment periods are updated at each reporting date. Revenue is recognized over the performance period using the input method.

Our proprietary, cloud-based practice management application automates the labor-intensive workflow of a medical office in a unified and streamlined SaaS platform. The Company has a large number of clients who utilize the Company’s practice management software, electronic health records software, patient experience management solutions, business intelligence software and/or robotic process automation software on a SaaS basis, but who do not utilize the Company’s revenue cycle management services. SaaS fees may be fixed based on the number of providers, or may be variable.

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Our digital health services include chronic care management, where a care manager has remote visits with patients with one or more chronic conditions under the supervision of a physician who is our client. The performance obligation for chronic care management is satisfied at a point in time once the patient receives the remote visit. The digital health services also include remote patient monitoring where our system monitors recordings from FDA approved internet connected devices. These devices record patient trends and alert the physician to changes which might trigger the need for additional follow-up visits. The performance obligations for remote patient monitoring are satisfied over time as the recordings are received and the patient receives the remote visit. The revenue for chronic care management for the three months ended June 30, 2026 and 2025, was approximately $572,000 and $791,000, respectively and for the six months ended June 30, 2026 and 2025, was approximately $1.1 million and $1.4 million, respectively. The revenue for remote patient monitoring for the three months ended June 30, 2026 and 2025, was approximately $239,000 and $199,000, respectively and for the six months ended June 30, 2026 and 2025, was approximately $452,000 and $376,000, respectively.

The medical billing clearinghouse service takes claim information from customers, checks the claims for errors and sends this information electronically to insurance companies. The Company invoices customers on a monthly basis based on the number of claims submitted and the agreed-upon rate in the agreement. This service is provided to medical practices and providers to medical practices who are not revenue cycle management customers. The performance obligation is satisfied once the relevant submissions are completed.

Additional services such as coding and transcription are rendered in connection with the delivery of revenue cycle management and related medical services. The Company invoices customers monthly, based on the actual amount of services performed at the agreed-upon rate in the contract. These services are only offered to revenue cycle management customers. These services do not represent a material right because the services are optional to the customer and customers electing these services are charged the same price for those services as if they were on a standalone basis. Each individual coding or transcription transaction processed represents a performance obligation, which is satisfied over time as that individual service is rendered.

Professional services:

Our professional services include an extensive set of services including EHR vendor-agnostic optimization and activation, project management, IT transformation consulting, process improvement, training, education and staffing for large healthcare organizations including health systems and hospitals. Professional services also include audit defense, risk mitigation and regulatory readiness. The performance obligation is satisfied over time using the input method. The revenue is recorded on a monthly basis as the professional services are rendered. Unbilled revenue at June 30, 2026 and 2025 was approximately $49,000 and $38,000, respectively.

Printing and mailing services:

The Company provides printing and mailing services for both revenue cycle management customers and a non-revenue cycle management customer, and invoices on a monthly basis based on the number of prints, the agreed-upon rate per print and the postage incurred. The performance obligation is satisfied once the printing and mailing is completed.

Group purchasing services:

The Company provides group purchasing services which enable medical providers to purchase various vaccines directly from selected pharmaceutical companies at a discounted price. Currently, there are approximately 4,000 medical providers who are members of the program. Revenue is recognized as the vaccine shipments are made to the medical providers. Fees from the pharmaceutical companies are paid either quarterly or annually and the Company adjusts its revenue accrual at the time of payment. The Company makes significant judgments regarding the variable consideration which we expect to be entitled to for the group purchasing services which includes the anticipated shipments to the members enrolled in the program, anticipated volumes of purchases made by the members, and the changes in the number of members. The amounts recorded are constrained by estimates of decreases in shipments and loss of members to avoid a significant revenue reversal in the subsequent period. The only performance obligation is to provide the pharmaceutical companies with the medical providers who want to become members in order to purchase vaccines. The performance obligation is satisfied once the medical provider agrees to purchase a specific quantity of vaccines and the medical provider’s information is forwarded to the vaccine suppliers. The Company records a contract asset for revenue earned and not paid as the ultimate payment is conditioned on achieving certain volume thresholds.

For all of the above revenue streams other than group purchasing services and chronic care management, revenue is recognized over time, which is typically one month or less, which closely matches the point in time that the customer simultaneously receives and consumes the benefits provided by the Company. For the group purchasing services, revenue is recognized at a point in time. Each service is substantially the same and has the same periodic pattern of transfer to the customer. Each of the services provided above is considered a separate performance obligation.

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

Medical practice management services:

The Company also provides medical practice management services under long-term management service agreements to three medical practices. We provide the medical practices with the nurses, administrative support, facilities, supplies, equipment, marketing, RCM, accounting, and other non-clinical services needed to efficiently operate their practices. Revenue is recognized as the services are provided to the medical practices. Revenue recorded in the condensed consolidated statements of operations represents the reimbursement of costs paid by the Company for the practices and the management fee earned each month for managing the practice. The management fee is based on either a fixed fee or a percentage of the net operating income.

The Company assumes all financial risk for the performance of the managed medical practices. Revenue is impacted by the amount of the costs incurred by the practices and their operating income. The gross billing of the practices is impacted by billing rates, changes in current procedural terminology code reimbursement and collection trends which in turn impact the management fee that the Company is entitled to. Billing rates are reviewed at least annually and adjusted based on current insurer reimbursement practices. The performance obligation is satisfied as the management services are provided.

Our contracts for medical practice management services have approximately an additional 13 years remaining and are only cancellable under very limited circumstances. The Company receives a management fee each month for managing the day-to-day business operations of each medical group as a fixed fee or a percentage payment of the net operating income which is included in revenue in the condensed consolidated statements of operations.

Our medical practice management services obligations consist of a series of distinct services that are substantially the same and have the same periodic pattern of transfer to our customers. Revenue is recognized over time, however for reporting and convenience purposes, the management fee is computed at each month-end.

Information about contract balances:

As of June 30, 2026, the estimated revenue expected to be recognized in the future related to the remaining revenue cycle management performance obligations outstanding was approximately $2.8 million. Approximately $350,000 and $324,000 of the contract asset represents revenue earned, not paid, from the group purchasing services and referral fees, respectively. We expect to recognize substantially all of the revenue for the remaining performance obligations over the next three months.

Amounts that we are entitled to collect under the applicable contract are recorded as accounts receivable. Invoicing is performed at the end of each month when the services have been provided. The contract asset includes our right to payment for services already transferred to a customer when the right to payment is conditional on something other than the passage of time. For example, contracts for revenue cycle management services where we recognize revenue over time but do not have a contractual right to payment until the customer receives payment of their claim from the insurance provider. The contract asset also includes the revenue accrued, not received, for the group purchasing services and referral fees earned.

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Changes in the contract asset are recorded as adjustments to net revenue. The changes primarily result from providing services to revenue cycle management customers that result in additional consideration and are offset by our right to payment for services becoming unconditional and changes in the revenue accrued for the group purchasing services. The contract asset for our group purchasing services is reduced when we receive payments from vaccine manufacturers and is increased for revenue earned, not received. The opening and closing balances of the Company’s accounts receivable, contract asset and deferred revenue are as follows:

SCHEDULE OF CHANGES IN ACCOUNTS RECEIVABLE, CONTRACT ASSET AND DEFERRED REVENUE

|  | Accounts Receivable - Net |  |  | Contract Asset |  |  | Deferred Revenue (current) |  |  | Deferred Revenue (long term) |
|  | ($ in thousands) |
Balance as of January 1, 2026 |  | $ | 15,062 |  |  | $ | 3,664 |  |  | $ |  | 4,148 |  | $ | 809
Acquisition |  |  | - |  |  |  | - |  |  |  | 168 |  |  |  | - |
(Decrease) increase, net |  |  | (945 | ) |  |  | (238 | ) |  |  | 191 |  |  |  | 125 |
Balance as of June 30, 2026 |  | $ | 14,117 |  |  | $ | 3,426 |  |  | $ | 4,507 |  |  | $ | 934 |
Balance as of January 1, 2025 |  | $ | 12,774 |  |  | $ | 4,334 |  |  | $ | 1,212 |  |  | $ | 387 |
Acquisition |  | $ | - |  |  | $ | 32 |  |  | $ | - |  |  | $ | - |
Increase (decrease), net |  |  | 789 |  |  |  | (411 | ) |  |  | 20 |  |  |  | 244 |
Balance as of June 30, 2025 |  | $ | 13,563 |  |  | $ | 3,955 |  |  | $ | 1,232 |  |  | $ | 631 |

Deferred commissions:

Our sales incentive plans include commissions payable to employees and third parties at the time of initial contract execution that are capitalized as incremental costs to obtain a contract. The capitalized commissions are amortized over the period the related services are transferred. As we do not offer commissions on contract renewals, we have determined the amortization period to be the estimated client life, which is three years. Deferred commissions were approximately $196,000 and $257,000 at June 30, 2026 and 2025, respectively, and are included in prepaid expenses and other current assets and other assets amounts in the condensed consolidated balance sheets. The amortization of deferred sales commissions during the three months ended June 30, 2026 and 2025 was approximately $42,000 and $65,000, respectively, and approximately $90,000 and $136,000 for the six months ended June 30, 2026 and 2025, respectively.

Trade Accounts Receivable – Estimate of Credit Losses:

ASU 2016-13 requires the recognition of lifetime estimated credit losses expected to occur for trade accounts receivable. The guidance also requires we pool assets with similar risk characteristics and consider current economic conditions when estimating losses. We segment the accounts receivable population into pools based on their risk assessment. Risks related to trade accounts receivable are a customer’s inability to pay or bankruptcy. Each pool is defined by an internal credit assessment and business size. The pools are aligned with management’s review of financial performance. For the three months ended June 30, 2026 and 2025, no adjustment to the pools was necessary.

We utilize a loss-rate method to measure the expected credit loss for each pool. The loss rate is calculated using a three-year lookback period of write-offs and adjustments, divided by the revenue for each pool by aging category, net of customer payments during that period. We consider current and future economic conditions, internal forecasts, customer collection experience and credit memos issued during the current period when assessing loss rates. We reviewed these factors and concluded that no adjustments should be made to the historical loss rate data for the current quarter. Trade receivables are written off only after the Company has exhausted all collection efforts.

Changes in the allowance for expected credit losses for trade accounts receivable are presented in the table below:

SCHEDULE OF TRADE ALLOWANCE FOR DOUBTFUL ACCOUNTS

|  | Six Months Ended |  |  | Year Ended |
|  | June 30, 2026 |  |  | December 31, 2025 |
|  | ($ in thousands) |
Beginning balance |  | $ | 854 |  |  | $ | 837 |
Provision |  |  | 118 |  |  |  | 286 |
Recoveries/adjustments |  |  | 54 |  |  |  | - |
Write-offs |  |  | (78 | ) |  |  | (269 | )
Ending balance |  | $ | 948 |  |  | $ | 854 |

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14. | STOCK-BASED COMPENSATION

In June 2026, the Company adopted the CareCloud, Inc. 2026 Equity Incentive Plan (the “2026 Plan”), reserving a total of 1,000,000 shares of common stock for grants to employees, officers, directors and consultants. Following the shareholder approval of the 2026 Plan, no additional awards may be granted under the Amended and Restated 2014 Equity Incentive Plan, and the 374,683 shares of common stock and 16,000 shares of Series B Preferred Stock that remained available for future grants under that plan were canceled and are no longer available for issuance. Outstanding awards previously granted under the Amended and Restated 2014 Equity Incentive Plan will remain outstanding. Permissible awards include incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, RSUs, performance stock and cash-settled awards and other stock-based awards in the discretion of the Compensation Committee of the Board of Directors including unrestricted stock grants.

The equity based RSUs contain a provision in which the units shall immediately vest and become converted into common shares at the rate of one common share per RSU, immediately after a change in control, as defined in the award agreement.

Common and preferred stock RSUs

For the three and six months ended June 30, 2026, stock compensation expense of approximately $64,000 and $128,000, respectively, and for the three and six months ended June 30, 2025 of approximately $111,000 and $219,000, respectively, was recorded. Stock compensation expense recorded is based on the value of the shares at the grant date and recognized over the service period. The portion of the stock compensation expense to be used for the payment of withholding and payroll taxes is included in accrued compensation in the condensed consolidated balance sheets. The balance of the stock compensation expense has been recorded as additional paid-in capital.

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

SCHEDULE OF SHARE-BASED COMPENSATION ARRANGEMENTS BY SHARE-BASED PAYMENT AWARD

|  | Common Stock |  |  | Series A Preferred Stock |  |  | Series B Preferred Stock |
Outstanding and unvested shares at January 1, 2026 |  |  | 161,400 |  |  |  | - |  |  |  | 19,199 |
Granted |  |  | - |  |  |  | - |  |  |  | - |
Vested |  |  | (56,400 | ) |  |  | - |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |  |  |  | (19,199 | )
Outstanding and unvested shares at June 30, 2026 |  |  | 105,000 |  |  |  | - |  |  |  | - |
Outstanding and unvested shares at January 1, 2025 |  |  | 242,500 |  |  |  | - |  |  |  | 19,199 |
Granted |  |  | - |  |  |  | - |  |  |  | - |
Vested |  |  | (89,700 | ) |  |  | - |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |  |  |  | - |
Outstanding and unvested shares at June 30, 2025 |  |  | 152,800 |  |  |  | - |  |  |  | 19,199 |

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

Stock-based compensation expense

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

SCHEDULE OF EMPLOYEE SERVICE SHARE-BASED COMPENSATION, ALLOCATION OF RECOGNIZED PERIOD COSTS

|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  |  | ($ in thousands) |
Direct operating costs |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |
General and administrative |  |  | 64 |  |  |  | 111 |  |  |  | 128 |  |  |  | 216 |
Research and development |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3 |
Selling and marketing |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total stock-based compensation expense |  | $ | 64 |  |  | $ | 111 |  |  | $ | 128 |  |  | $ | 219 |

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15. | INCOME TAXES

The income tax expense for the three months ended June 30, 2026 was approximately $102,000 comprised of current state tax expense of $39,000, foreign tax expense of $13,000 and deferred tax expense of $50,000. The income tax expense for the six months ended June 30, 2026 was approximately $154,000 comprised of a current state tax expense of $78,000, foreign tax expense of $26,000 and deferred tax expense of $50,000.

The income tax expense for the three months ended June 30, 2025 was approximately $42,000 comprised of current state tax expense of $30,000 and foreign tax expense of $12,000. The income tax expense for the six months ended June 30, 2025 was approximately $83,000 comprised of current state tax expense of $60,000 and foreign tax expense of $23,000. There was no deferred tax expense for the three and six months ended June 30, 2025.

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

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

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

16. | FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair values of assets and liabilities required to be measured at fair value are categorized based upon the level of judgement associated with the inputs used to measure their value in one of the following three categories:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. We held no Level 1 financial instruments at June 30, 2026 or December 31, 2025.

Level 2: Quoted prices for similar instruments in active markets with inputs that are observable, either directly or indirectly. Our Level 2 financial instruments include notes payable which are carried at cost and approximate fair value since the interest rates being charged approximate market rates.

Level 3: Unobservable inputs are significant to the fair value of the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Our Level 3 instruments include the fair value of contingent consideration related to completed acquisitions. The fair value at June 30, 2026 is based on a discounted cash flow analysis reflecting the likelihood of achieving specified performance measures or events and captures the contractual nature of the contingencies, the passage of time and the associated discount rate.

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The following table provides a reconciliation of the beginning and ending balances for the contingent consideration measured at fair value using significant unobservable inputs (Level 3):

FAIR VALUE OF THE ASSETS MEASURED ON A NON-RECURRING BASIS

|  | 2026 |  |  | 2025 |
|  | Fair Value Measurement at Reporting Date Using Significant Unobservable Inputs, Level 3 |
|  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |
|  | ($ in thousands) |
Balance - January 1, |  | $ | 1,141 |  |  | $ | - |
Acquisitions |  |  | 151 |  |  |  | 756 |
Goodwill adjustment |  |  | (7 | ) |  |  | - |
Change in fair value |  |  | 23 |  |  |  | - |
Payments |  |  | (618 | ) |  |  | - |
Balance - June 30, |  | $ | 690 |  |  | $ | 756 |

17. | SEGMENT REPORTING

Effective January 1, 2026, the Chief Executive Officer (“CEO”) and Executive Chairman serve as the Chief Operating Decision Maker (“CODM”), organizing the Company, managing resource allocations and measuring performance among two operating and reportable segments: (i) Healthcare IT and (ii) Medical Practice Management. From January 1, 2025, through December 31, 2025, the Executive Chairman and the two Co-CEOs served as the CODM. We report our segment information based on the internal reporting used by management for making decisions and assessing performance of our reportable segments.

The CODM evaluates the financial performance of the business units on the basis of revenue, certain individual and total operating expenses and operating income (loss) excluding unallocated amounts, which are mainly corporate overhead costs, for assessing operating results and the allocation of resources. Our CODM does not evaluate operating segments using asset or liability information. The CODM uses segment revenue, certain segment operating expenses and segment operating income (loss) to manage the segments, comparing actual results to forecasted amounts and investigating the reasons for significant variances. Our CODM does not evaluate operating segments using asset or liability information. Currently, a focus is being placed on reducing costs and managing global headcount. The segment revenue and segment operating income (loss) is also used to assess the performance of personnel and in establishing their compensation.

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The Healthcare IT segment includes revenue cycle management, SaaS solutions and other services. The Medical Practice Management segment includes the management of three medical practices. Each segment is considered a reporting unit. The accounting policies of the segments are the same as those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March 12, 2026. The following table presents revenues, operating expenses and operating income (loss) by reportable segment:

SCHEDULE OF REVENUES, OPERATING EXPENSES AND OPERATING INCOME (LOSS) BY REPORTABLE SEGMENT

|  | Six Months Ended June 30, 2026 |
|  | ($ in thousands) |
|  | Healthcare IT |  |  | Medical Practice Management |  |  | Total |
Net revenue |  | $ | 55,698 |  |  | $ | 7,452 | (a) |  | $ | 63,150 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Direct operating costs |  |  | 28,259 |  |  |  | 6,048 |  |  |  | 34,307 |
Selling and marketing |  |  | 2,704 |  |  |  | 10 |  |  |  | 2,714 |
General and administrative |  |  | 5,223 |  |  |  | 1,360 |  |  |  | 6,583 |
Research and development |  |  | 4,610 |  |  |  | - |  |  |  | 4,610 |
Change in contingent consideration |  |  | 23 |  |  |  | - |  |  |  | 23 |
Depreciation and amortization |  |  | 7,603 |  |  |  | 165 |  |  |  | 7,768 |
Restructuring costs |  |  |  |  |  |  |  |  |  |  |  |
Total operating expenses |  |  | 48,422 |  |  |  | 7,583 |  |  |  | 56,005 |
Segment operating income (loss) |  | $ | 7,276 |  |  | $ | (131 | ) |  |  | 7,145 |
Reconciliation of profit or loss (segment profit/loss): |  |  |  |  |  |  |  |  |  |  |  |
Unallocated corporate expenses |  |  |  |  |  |  |  |  |  |  | (4,283 | )
Net interest expense |  |  |  |  |  |  |  |  |  |  | (790 | )
Other income |  |  |  |  |  |  |  |  |  |  | 126 |
Income before income taxes |  |  |  |  |  |  |  |  |  | $ | 2,198 |

|  | Three Months Ended June 30, 2026 |
|  | ($ in thousands) |
|  | Healthcare IT |  |  | Medical Practice Management |  |  | Total |
Net revenue |  | $ | 28,194 |  |  | $ | 3,686 | (a) |  | $ | 31,880 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Direct operating costs |  |  | 14,436 |  |  |  | 3,021 |  |  |  | 17,457 |
Selling and marketing |  |  | 1,298 |  |  |  | 2 |  |  |  | 1,300 |
General and administrative |  |  | 2,550 |  |  |  | 717 |  |  |  | 3,267 |
Research and development |  |  | 2,194 |  |  |  | - |  |  |  | 2,194 |
Change in contingent consideration |  |  | (34 | ) |  |  | - |  |  |  | (34 | )
Depreciation and amortization |  |  | 3,648 |  |  |  | 83 |  |  |  | 3,731 |
Total operating expenses |  |  | 24,092 |  |  |  | 3,823 |  |  |  | 27,915 |
Segment operating income (loss) |  | $ | 4,102 |  |  | $ | (137 | ) |  |  | 3,965 |
Reconciliation of profit or loss (segment profit/loss) |  |  |  |  |  |  |  |  |  |  |  |
Unallocated corporate expenses |  |  |  |  |  |  |  |  |  |  | (2,103 | )
Net interest expense |  |  |  |  |  |  |  |  |  |  | (742 | )
Other income |  |  |  |  |  |  |  |  |  |  | 104 |
Income before income taxes |  |  |  |  |  |  |  |  |  | $ | 1,224 |

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|  | Six Months Ended June 30, 2025 |
|  | ($ in thousands) |
|  | Healthcare IT |  |  | Medical Practice Management |  |  | Total |
Net revenue |  | $ | 48,719 |  |  | $ | 6,290 | (a) |  | $ | 55,009 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Direct operating costs |  |  | 24,666 |  |  |  | 5,278 |  |  |  | 29,944 |
Selling and marketing |  |  | 2,234 |  |  |  | 15 |  |  |  | 2,249 |
General and administrative |  |  | 4,455 |  |  |  | 1,211 |  |  |  | 5,666 |
Research and development |  |  | 2,255 |  |  |  | - |  |  |  | 2,255 |
Depreciation and amortization |  |  | 6,555 |  |  |  | 164 |  |  |  | 6,719 |
Restructuring costs |  |  | 137 |  |  |  | - |  |  |  | 137 |
Total operating expenses |  |  | 40,302 |  |  |  | 6,668 |  |  |  | 46,970 |
Segment operating income (loss) |  | $ | 8,417 |  |  | $ | (378 | ) |  |  | 8,039 |
Reconciliation of profit or loss (segment profit/loss): |  |  |  |  |  |  |  |  |  |  |  |
Unallocated corporate expenses |  |  |  |  |  |  |  |  |  |  | (3,024 | )
Net interest expense |  |  |  |  |  |  |  |  |  |  | (33 | )
Other expense |  |  |  |  |  |  |  |  |  |  | (49 | )
Income before income taxes |  |  |  |  |  |  |  |  |  | $ | 4,933 |

|  | Three Months Ended June 30, 2025 |
|  | ($ in thousands) |
|  | Healthcare IT |  |  | Medical Practice Management |  |  | Total |
Net revenue |  | $ | 24,077 |  |  | $ | 3,300 | (a) |  | $ | 27,377 |
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |
Direct operating costs |  |  | 11,763 |  |  |  | 2,717 |  |  |  | 14,480 |
Selling and marketing |  |  | 1,110 |  |  |  | 8 |  |  |  | 1,118 |
General and administrative |  |  | 2,343 |  |  |  | 569 |  |  |  | 2,912 |
Research and development |  |  | 1,020 |  |  |  | - |  |  |  | 1,020 |
Depreciation and amortization |  |  | 3,300 |  |  |  | 82 |  |  |  | 3,382 |
Restructuring costs |  |  | 23 |  |  |  | - |  |  |  | 23 |
Total operating expenses |  |  | 19,559 |  |  |  | 3,376 |  |  |  | 22,935 |
Segment operating income (loss) |  | $ | 4,518 |  |  | $ | (76 | ) |  |  | 4,442 |
Reconciliation of profit or loss (segment profit/loss) |  |  |  |  |  |  |  |  |  |  |  |
Unallocated corporate expenses |  |  |  |  |  |  |  |  |  |  | (1,446 | )
Net interest expense |  |  |  |  |  |  |  |  |  |  | (17 | )
Other expense |  |  |  |  |  |  |  |  |  |  | (35 | )
Income before income taxes |  |  |  |  |  |  |  |  |  | $ | 2,944 |

(a) | This revenue represents fees based on our actual costs plus a percentage of the operating profit.

18. | SUBSEQUENT EVENTS

On July 22, 2026, the Company entered into a Securities Account Control Agreement and a Securities Account Pledge Agreement with Citizens, as administrative agent, in connection with 4.3 million shares of the Company’s common stock owned by its Executive Chairman Mahmud Haq and two trusts, one controlled by Mr. Haq and the other one controlled by his wife.

Also on July 22, 2026, in connection with the Credit Facility, the Company issued a warrant to the Executive Chairman (the “Warrant”) to purchase up to 4.3 million shares of the Company’s common stock at an exercise price of $5.00 per share, with a term of five years. The Warrant vests over time on an accelerated basis through June 2027 and may be exercised on a cash or net share settlement basis. The Warrant has customary anti-dilution provisions. The Warrant is in consideration for pledging certain Company common stock as collateral for the Company’s obligations under the Credit Facility. The shares issuable upon exercise of the Warrant have not been registered under the Securities Act of 1933, as amended, and are subject to customary transfer restrictions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our condensed consolidated financial condition and results of operations for the three and six months ended June 30, 2026 and 2025, and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read together with our Condensed Consolidated Financial Statements and related notes beginning on page 4 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 12, 2026.

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

Financial Risks

The Company maintains cash balances at Provident Bank (“Provident”) in excess of the FDIC insurance coverage limits. The Company performs periodic evaluations of the relative credit standing of Provident to ensure their credit worthiness. As of June 30, 2026 and December 31, 2025, the Company held cash of approximately $1.3 million and $1.1 million, respectively, in the name of its subsidiaries at banks in Pakistan and Sri Lanka. The banking systems in these countries do not provide deposit insurance coverage. The Company has not experienced any losses on its cash accounts.

Overview

The Company is a healthcare information technology company that provides technology-enabled revenue cycle management and a full suite of proprietary cloud-based solutions to healthcare providers, from small practices to enterprise medical groups, hospitals, and health systems throughout the United States. Our integrated Software-as-a-Service (“SaaS”) platform includes revenue cycle management (“RCM”), practice management (“PM”), electronic health records (“EHR”), business intelligence, telehealth, patient experience management (“PXM”) solutions and complementary software tools and business services for high-performance medical groups and health systems. The Company also offers printing and mailing and group purchasing services.

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

| ● | Technology-enabled revenue cycle management:
|  |  | ○ | Revenue Cycle Management services including end-to-end medical billing, eligibility, analytics, and related services, all of which can be provided utilizing our technology platform and robotic process automation tools or leveraging a third-party system;
|  |  | ○ | Medical coding and credentialing services to improve provider collections, back-end cost containment, and drive total revenue realization for our healthcare clients; and
|  |  | ○ | Healthcare claims clearinghouse which enables our clients to electronically scrub and submit claims and process payments from insurance companies.

| ● | Cloud-based software:
|  |  | ○ | Electronic Health Records designed for ambulatory and inpatient care environments, which are user-friendly and integrated with our business services, and enable our healthcare provider clients to enhance patient care delivery, optimize clinical workflows, reduce documentation errors and potentially qualify for government incentives;
|  |  | ○ | Practice Management software and related capabilities for both ambulatory and inpatient care settings, which support our clients’ day-to-day business operations and financial workflows, including automated insurance eligibility verification, a robust billing and claims rules engine and other automated tools designed to maximize reimbursement;
|  |  | ○ | Healthline, which is a medical inventory management system built for healthcare settings that enables real-time tracking of supplies, equipment and consumables across multiple locations such as exam rooms, ambulances and storage closets;
|  |  | ○ | Marketware, which offers a comprehensive physician strategy suite designed to support healthcare organizations in optimizing physician relationship management, streamlining recruitment and onboarding processes, and leveraging performance analytics. The platform consolidates critical data to enhance referral volume, strengthen provider engagement and drive strategic organizational growth;

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| ○ | Wellsoft, a solution for provider workflows in emergency departments and urgent care facilities, has seamless integration into all major hospital IT systems and ancillary departments providing real-time patient tracking and instant lab orders, drug interaction checking and pharmacy review;
| ○ | CareVue is an EHR software that enhances clinical workflows for small hospitals and inpatient behavioral health facilities, driving efficiencies across inpatient settings through enhanced charting tools, e-prescribing, medication management and secure clinical communications;
| ○ | Artificial intelligence (“AI”):
|  | ● | CareCloud cirrusAI is designed to serve as a digital healthcare assistant, helping to enhance clinical decision-making, streamline workflows, reduce administrative burdens, optimize revenue management, and promote patient-centered care. The functions include:
|  |  | ● | AI-Powered Clinical Decision Support: CareCloud cirrusAI Guide automates clinical data input, and assists clinicians in workflow tasks, providing real-time, evidence-based recommendations and personalized suggestions via Vertex AI’s generative AI tools for providers to consider. This innovation can lead to enhanced diagnosis accuracy and treatment planning.
|  |  | ● | AI-Powered Virtual Support Assistant: CareCloud cirrusAI Chat facilitates natural language conversations with practice staff members, offering valuable assistance in navigating CareCloud Electronic Health Records workflows. This tool streamlines post-training and onboarding for new staff, reducing response times and providing real-time assistance, ultimately saving time.
|  |  | ● | AI-Driven Appeals: CareCloud cirrusAI Appeals generates customized appeal letters by analyzing patient claim details, the appeal’s reason, and the specific payor involved for healthcare workers to review, edit, and send. This functionality supports CareCloud’s RCM teams in optimizing providers’ RCM and securing proper reimbursement.
|  | ● | CareCloud cirrusAI integrates with CareCloud’s EHR solutions, talkEHR and CareCloud Charts, making it easily accessible to providers of all sizes.
|  | ● | CareCloud stratusAI Desk Agent is an agentic AI phone receptionist designed to modernize and automate patient phone interactions. This tool brings conversational AI directly into the call center workflow, eliminating hold times and reducing manual workload while delivering accurate, around-the-clock phone support.
| ○ | Patient Experience Management solutions designed to transform interactions between patients and their clinicians, including smartphone applications that assist patients and healthcare providers in the provision of healthcare services, contactless digital check-in solutions, messaging, and online appointment scheduling tools;
| ○ | Business Intelligence and healthcare analytics platforms that allow our clients to derive actionable insights from their vast amount of data; and
| ○ | Customized applications, interfaces, and a variety of other technology solutions that support our healthcare clients.

| ● | Digital health:
|  |  | ○ | Chronic care management is a program that supports care for patients with chronic conditions by certified care managers that operate under the supervision of the patient’s regular physician;
|  |  | ○ | Remote patient monitoring enables patient data collected outside the clinical setting through remote devices to be fed into their provider’s EHR to enable proactive patient care; and
|  |  | ○ | Telemedicine solutions allow healthcare providers to conduct remote patient visits and extend the timely delivery of care to patients unable to travel to a provider’s office.

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| ● | Healthcare IT professional services & staffing:
|  |  | ○ | Professional services consisting of a broad range of consulting services including full software implementations and activation, revenue cycle optimization, data analytic services, and educational training services;
|  |  | ○ | Strategic advisory services to manage system evaluations and selection, provide interim management, and operational assessments;
|  |  | ○ | Workforce augmentation and on-demand staffing to support our clients as they expand their businesses, seek highly trained personnel, or struggle to address staffing shortages; and
|  |  | ○ | Managed services includes inpatient and outpatient IT services, government consulting and product development services.

| ● | Empower:
|  |  | Services include:
|  |  | ○ | Revenue Integrity — risk adjustment, HCC coding and audits and revenue cycle compliance;
|  |  | ○ | Mergers & Acquisitions — compliance due diligence and integration support for healthcare transactions
|  |  | ○ | Privacy & Security — HIPAA and HITECH policy development, security risk analysis, and breach response; and
|  |  | ○ | Compliance & Ethics — compliance program effectiveness audits, ethics program development, OSHA workplace safety programs, and ongoing co-sourced compliance officer support.

| ● | MAP App:
|  |  | ○ | MAP App is an industry-leading tool for benchmarking and measuring revenue cycle management performance, which was developed by the Healthcare Financial Management Association and is used by top hospitals and healthcare organizations nationwide.

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.

We are able to deliver our industry-leading solutions at very competitive prices because we leverage a combination of our proprietary software, which automates our workflows and increases efficiency, together with our team of approximately 250 experienced health industry experts throughout the United States. These experts are supported by our highly educated and specialized offshore workforce of approximately 3,100 team members that are approximately 17% of the cost of comparably educated and skilled workers in the U.S. Our unique business model also allowed us to become a leading consolidator in our industry sector, gaining us a reputation for acquiring and positively transforming distressed competitors into profitable operations of CareCloud.

Our offshore operations in the Pakistan Offices and Sri Lanka together accounted for approximately 17% and 18% of total expenses for the six months ended June 30, 2026 and 2025, respectively. A significant portion of those foreign expenses were personnel-related costs (approximately 73% and 77% for the six months ended June 30, 2026 and 2025, respectively). Because personnel-related costs are significantly lower in Pakistan and Sri Lanka than in the U.S. and many other offshore locations, we believe our offshore operations give us a competitive advantage over many industry participants. We are able to achieve significant cost reductions and leverage technology to reduce manual work and strategically transition a portion of the remaining manual tasks to our highly-specialized, cost-efficient team in the U.S., the Pakistan Offices and Sri Lanka. Our offshore operations are subject to geopolitical, economic and operational risks; see “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K.

Key Performance Measures

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

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

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

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

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

Set forth below is a presentation of our adjusted EBITDA for the three and six months ended June 30, 2026 and 2025:

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | ($ in thousands) |
Net revenue |  | $ | 31,880 |  |  | $ | 27,377 |  |  | $ | 63,150 |  |  | $ | 55,009 |
GAAP net income |  |  | 1,122 |  |  |  | 2,902 |  |  |  | 2,044 |  |  |  | 4,850 |
Provision for income taxes |  |  | 102 |  |  |  | 42 |  |  |  | 154 |  |  |  | 83 |
Net interest expense |  |  | 742 |  |  |  | 17 |  |  |  | 790 |  |  |  | 33 |
Foreign exchange loss / other expense |  |  | 54 |  |  |  | 41 |  |  |  | 86 |  |  |  | 60 |
Stock-based compensation expense |  |  | 64 |  |  |  | 111 |  |  |  | 128 |  |  |  | 219 |
Depreciation and amortization |  |  | 3,731 |  |  |  | 3,382 |  |  |  | 7,768 |  |  |  | 6,719 |
Change in contingent consideration |  |  | (34 | ) |  |  | - |  |  |  | 23 |  |  |  | - |
Transaction and integration costs |  |  | 166 |  |  |  | 11 |  |  |  | 324 |  |  |  | 23 |
Restructuring costs |  |  | - |  |  |  | 23 |  |  |  | - |  |  |  | 137 |
Adjusted EBITDA |  | $ | 5,947 |  |  | $ | 6,529 |  |  | $ | 11,317 |  |  | $ | 12,124 |

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

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

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Set forth below is a presentation of our adjusted operating income and adjusted operating margin, which represents adjusted operating income as a percentage of net revenue for the three and six months ended June 30, 2026 and 2025:

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | ($ in thousands) |
Net revenue |  | $ | 31,880 |  |  | $ | 27,377 |  |  | $ | 63,150 |  |  | $ | 55,009 |
GAAP net income |  |  | 1,122 |  |  |  | 2,902 |  |  |  | 2,044 |  |  |  | 4,850 |
Provision for income taxes |  |  | 102 |  |  |  | 42 |  |  |  | 154 |  |  |  | 83 |
Net interest expense |  |  | 742 |  |  |  | 17 |  |  |  | 790 |  |  |  | 33 |
Other (income) expense - net |  |  | (104 | ) |  |  | 35 |  |  |  | (126 | ) |  |  | 49 |
GAAP operating income |  |  | 1,862 |  |  |  | 2,996 |  |  |  | 2,862 |  |  |  | 5,015 |
GAAP operating margin |  |  | 5.8 | % |  |  | 10.9 | % |  |  | 4.5 | % |  |  | 9.1 | %
Stock-based compensation expense |  |  | 64 |  |  |  | 111 |  |  |  | 128 |  |  |  | 219 |
Amortization of purchased intangible assets |  |  | 945 |  |  |  | 193 |  |  |  | 1,873 |  |  |  | 282 |
Transaction and integration costs |  |  | 166 |  |  |  | 11 |  |  |  | 324 |  |  |  | 23 |
Change in contingent consideration |  |  | (34 | ) |  |  | - |  |  |  | 23 |  |  |  | - |
Restructuring costs |  |  | - |  |  |  | 23 |  |  |  | - |  |  |  | 137 |
Non-GAAP adjusted operating income |  | $ | 3,003 |  |  | $ | 3,334 |  |  | $ | 5,210 |  |  | $ | 5,676 |
Non-GAAP adjusted operating margin |  |  | 9.4 | % |  |  | 12.2 | % |  |  | 8.3 | % |  |  | 10.3 | %

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

| ● | Foreign currency losses and other non-operating expenditures;
| ● | Stock-based compensation expense which includes cash-settled awards and the related taxes;
| ● | Amortization of purchased intangible assets;
| ● | Integration costs, such as severance amounts paid to employees from acquired businesses, and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements;
| ● | Change in contingent consideration;
| ● | Restructuring costs; and
| ● | Income tax expense resulting from the amortization of goodwill related to our acquisitions.

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No tax effect has been provided in computing non-GAAP adjusted net income and non-GAAP adjusted net income per share as the Company has sufficient carry forward net operating losses to offset the applicable income taxes. The following table shows our reconciliation of GAAP net income to non-GAAP adjusted net income for the three and six months ended June 30, 2026 and 2025:

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
|  | ($ in thousands) |
GAAP net income |  | $ | 1,122 |  |  | $ | 2,902 |  |  | $ | 2,044 |  |  | $ | 4,850 |
Foreign exchange loss / other expense |  |  | 54 |  |  |  | 41 |  |  |  | 86 |  |  |  | 60 |
Stock-based compensation expense |  |  | 64 |  |  |  | 111 |  |  |  | 128 |  |  |  | 219 |
Amortization of purchased intangible assets |  |  | 945 |  |  |  | 193 |  |  |  | 1,873 |  |  |  | 282 |
Transaction and integration costs |  |  | 166 |  |  |  | 11 |  |  |  | 324 |  |  |  | 23 |
Change in contingent consideration |  |  | (34 | ) |  |  | - |  |  |  | 23 |  |  |  | - |
Restructuring costs |  |  | - |  |  |  | 23 |  |  |  | - |  |  |  | 137 |
Income tax expense related to goodwill |  |  | 50 |  |  |  | - |  |  |  | 50 |  |  |  | - |
Non-GAAP adjusted net income |  | $ | 2,367 |  |  | $ | 3,281 |  |  | $ | 4,528 |  |  | $ | 5,571 |

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

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
GAAP net income (loss) attributable to common shareholders, per share |  | $ | 0.00 |  |  | $ | 0.04 |  |  | $ | (0.01 | ) |  | $ | 0.02 |
Impact of preferred stock dividend |  |  | 0.03 |  |  |  | 0.03 |  |  |  | 0.06 |  |  |  | 0.09 |
Net income per end-of-period share |  |  | 0.03 |  |  |  | 0.07 |  |  |  | 0.05 |  |  |  | 0.11 |
Foreign exchange loss / other expense |  |  | 0.00 |  |  |  | 0.00 |  |  |  | 0.00 |  |  |  | 0.00 |
Stock-based compensation expense |  |  | 0.01 |  |  |  | 0.00 |  |  |  | 0.01 |  |  |  | 0.01 |
Amortization of purchased intangible assets |  |  | 0.02 |  |  |  | 0.00 |  |  |  | 0.04 |  |  |  | 0.01 |
Transaction and integration costs |  |  | 0.00 |  |  |  | 0.00 |  |  |  | 0.01 |  |  |  | 0.00 |
Change in contingent consideration |  |  | 0.00 |  |  |  | 0.00 |  |  |  | 0.00 |  |  |  | - |
Restructuring costs |  |  | - |  |  |  | 0.00 |  |  |  | - |  |  |  | 0.00 |
Income tax expense related to goodwill |  |  | 0.00 |  |  |  | - |  |  |  | 0.00 |  |  |  | - |
Non-GAAP adjusted earnings per share |  | $ | 0.06 |  |  | $ | 0.07 |  |  | $ | 0.11 |  |  | $ | 0.13 |
End-of-period common shares |  |  | 42,493,859 |  |  |  | 42,322,039 |  |  |  | 42,493,859 |  |  |  | 42,322,039 |

For purposes of determining non-GAAP adjusted earnings per share, the Company used the number of common shares outstanding at the end of June 30, 2026 and 2025. Non-GAAP adjusted earnings per share does not take into account dividends declared or earned on preferred stock.

Key Metrics

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

Providers and Practices Served: As of June 30, 2026 and 2025, we provided services to approximately 44,000 and 40,000 providers, respectively (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services), representing approximately 2,900 independent medical practices, hospitals and service organizations. The foregoing numbers include clients leveraging any of our products or services and are based in part upon estimates in cases where the precise number of practices or providers is unknown.

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Sources of Revenue

Revenue: We primarily derive our revenue from subscription-based technology-enabled business solutions, reported in our Healthcare IT segment, which are typically billed as a percentage of payments collected by our customers. This fee includes technology-enabled RCM, as well as the ability to use our EHR, practice management system and other software as part of the bundled fee. These solutions accounted for approximately 75% and 69% of revenue for the three months ended June 30, 2026 and 2025, respectively, and 74% and 67% of revenue for the six months ended June 30, 2026 and 2025, respectively. Other healthcare IT services, including printing and mailing operations, group purchasing and professional services, represented approximately 13% and 19% of revenue for the three months ended June 30, 2026 and 2025, respectively, and 14% and 22% of revenue for the six months ended June 30, 2026 and 2025, respectively.

We earned approximately 12% of our revenue from medical practice management services during both the three and six months ended June 30, 2026 and 2025, respectively. This revenue represents fees based on our actual costs plus a percentage of the operating profit and is reported in our Medical Practice Management segment.

Operating Expenses

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

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

General and Administrative Expense. General and administrative expense consists primarily of personnel-related expense for administrative employees, including compensation, benefits, travel, facility lease costs, insurance, software license fees and outside professional fees.

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

Change in contingent consideration. Contingent consideration represents the portion of consideration payable to the seller of some of our acquisitions, the amount of which is based on the achievement of defined performance measures contained in the purchase agreements. Contingent consideration is adjusted to fair value at the end of each reporting period.

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

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

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

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Income Taxes. In preparing our condensed consolidated financial statements, we estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred income tax assets and liabilities. Although the Company has returned to profitability, it incurred losses historically and there is uncertainty regarding sufficient future U.S. taxable income, which makes realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all deferred tax assets as of June 30, 2026 and December 31, 2025.

Critical Accounting Policies and Estimates

The critical accounting policies and estimates used in the preparation of our condensed consolidated financial statements that we believe affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements presented in this Report are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.

Capitalized Software Costs:

As of June 30, 2026 and December 31, 2025, the carrying amount of internally-developed capitalized software in use was $2.5 million and $5.3 million, respectively. The decrease was due to the amortization exceeding the amounts being capitalized.

There have been no material changes in our critical accounting policies and estimates from those described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 12, 2026.

Results of Operations

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

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
Net revenue |  |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | %
Operating expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Direct operating costs |  |  | 54.7 | % |  |  | 52.9 | % |  |  | 54.3 | % |  |  | 54.4 | %
Selling and marketing |  |  | 4.1 | % |  |  | 4.1 | % |  |  | 4.3 | % |  |  | 4.1 | %
General and administrative |  |  | 16.8 | % |  |  | 15.9 | % |  |  | 17.2 | % |  |  | 15.8 | %
Research and development |  |  | 6.9 | % |  |  | 3.7 | % |  |  | 7.3 | % |  |  | 4.1 | %
Change in contingent consideration |  |  | 0.0 | % |  |  | - |  |  |  | 0.0 | % |  |  | - |
Depreciation and amortization |  |  | 11.7 | % |  |  | 12.4 | % |  |  | 12.3 | % |  |  | 12.2 | %
Restructuring costs |  |  | - |  |  |  | 0.1 | % |  |  | - |  |  |  | 0.3 | %
Total operating expenses |  |  | 94.2 | % |  |  | 89.1 | % |  |  | 95.4 | % |  |  | 90.9 | %
Operating income |  |  | 5.8 | % |  |  | 10.9 | % |  |  | 4.6 | % |  |  | 9.1 | %
Net interest expense |  |  | (2.3 | %) |  |  | (0.1 | %) |  |  | (1.3 | %) |  |  | 0.0 | %
Other income (expense) - net |  |  | 0.3 | % |  |  | (0.1 | %) |  |  | 0.2 | % |  |  | (0.1 | %)
Income before provision for income taxes |  |  | 3.8 | % |  |  | 10.7 | % |  |  | 3.5 | % |  |  | 9.0 | %
Income tax provision |  |  | 0.3 | % |  |  | 0.1 | % |  |  | 0.2 | % |  |  | 0.2 | %
Net income |  |  | 3.5 | % |  |  | 10.6 | % |  |  | 3.3 | % |  |  | 8.8 | %

40

Comparison of the three and six months ended June 30, 2026 and 2025:

|  | Three Months Ended June 30, |  |  | Change |  |  | Six Months Ended June 30, |  |  | Change |
|  | 2026 |  |  | 2025 |  |  | Amount |  |  | Percent |  |  | 2026 |  |  | 2025 |  |  | Amount |  |  | Percent |
|  | ($ in thousands) |
Net revenue |  | $ | 31,880 |  |  | $ | 27,377 |  |  | $ | 4,503 |  |  |  | 16 | % |  | $ | 63,150 |  |  | $ | 55,009 |  |  | $ | 8,141 |  |  |  | 15 | %

Net Revenue. Net revenue of $31.9 million and $63.2 million for the three and six months ended June 30, 2026, increased by $4.5 million or 16% and increased by $8.1 million or 15% from net revenue of $27.4 million and $55.0 million for the three and six months ended June 30, 2025, respectively. Revenue for the three and six months ended June 30, 2026 includes $24.0 million and $47.0 million relating to technology-enabled business solutions, $3.2 million and $6.3 million related to professional services and $3.7 million and $7.5 million for medical practice management services, respectively. Printing and mailing services and group purchasing services revenue was $1.0 million and $2.3 million for the three and six months ended June 30, 2026, respectively.

During the three and six months ended June 30, 2026, there was approximately $6.8 million and $13.6 million of revenue related to the Medsphere acquisition. The medSR revenue, which is project based, decreased approximately $1.3 million and $4.2 million compared to the three and six months ended June 30, 2025.

|  | Three Months Ended June 30, |  |  | Change |  |  | Six Months Ended June 30, |  |  | Change |
|  | 2026 |  |  | 2025 |  |  | Amount |  |  | Percent |  |  | 2026 |  |  | 2025 |  |  | Amount |  |  | Percent |
|  | ($ in thousands) |
Direct operating costs |  | $ | 17,457 |  |  | $ | 14,480 |  |  | $ | 2,977 |  |  |  | 21 | % |  | $ | 34,307 |  |  | $ | 29,944 |  |  | $ | 4,363 |  |  |  | 15 | %
Selling and marketing |  |  | 1,300 |  |  |  | 1,118 |  |  |  | 182 |  |  |  | 16 | % |  |  | 2,714 |  |  |  | 2,249 |  |  |  | 465 |  |  |  | 21 | %
General and administrative |  |  | 5,370 |  |  |  | 4,358 |  |  |  | 1,012 |  |  |  | 23 | % |  |  | 10,866 |  |  |  | 8,690 |  |  |  | 2,176 |  |  |  | 25 | %
Research and development |  |  | 2,194 |  |  |  | 1,020 |  |  |  | 1,174 |  |  |  | 115 | % |  |  | 4,610 |  |  |  | 2,255 |  |  |  | 2,355 |  |  |  | 104 | %
Change in contingent consideration |  |  | (34 | ) |  |  | - |  |  |  | (34 | ) |  |  | (100 | %) |  |  | 23 |  |  |  | - |  |  |  | 23 |  |  |  | 100 | %
Depreciation |  |  | 748 |  |  |  | 594 |  |  |  | 154 |  |  |  | 26 | % |  |  | 1,488 |  |  |  | 1,155 |  |  |  | 333 |  |  |  | 29 | %
Amortization |  |  | 2,983 |  |  |  | 2,788 |  |  |  | 195 |  |  |  | 7 | % |  |  | 6,280 |  |  |  | 5,564 |  |  |  | 716 |  |  |  | 13 | %
Restructuring costs |  |  | - |  |  |  | 23 |  |  |  | (23 | ) |  |  | (100 | %) |  |  | - |  |  |  | 137 |  |  |  | (137 | ) |  |  | (100 | %)
Total operating expenses |  | $ | 30,018 |  |  | $ | 24,381 |  |  | $ | 5,637 |  |  |  | 23 | % |  | $ | 60,288 |  |  | $ | 49,994 |  |  | $ | 10,294 |  |  |  | 21 | %

Direct Operating Costs. Direct operating costs of $17.5 million and $34.3 million for the three and six months ended June 30, 2026 increased by $3.0 million or 21% and increased by $4.4 million or 15% compared to direct operating costs of $14.5 million and $29.9 million for the three and six months ended June 30, 2025, respectively. During the three and six months ended June 30, 2026, salary costs increased by $889,000 and $769,000, outsourcing and processing costs increased by $1.9 million and $3.4 million and billable expenses decreased by $46,000 and $381,000, respectively.

Selling and Marketing Expense. Selling and marketing expense of $1.3 million and $2.7 million for the three and six months ended June 30, 2026 increased by $182,000 or 16% and $465,000 or 21% from selling and marketing expense of $1.1 million and $2.2 million for the three and six months ended June 30, 2025, respectively. The increase for the three and six months ended June 30, 2026 was primarily due to additional headcount.

General and Administrative Expense. General and administrative expense of $5.4 million and $10.9 million for the three and six months ended June 30, 2026 increased by $1.0 million or 23% and $2.2 million or 25% compared to general and administrative expense of $4.4 million and $8.7 million for the three and six months ended June 30, 2025, respectively. During the three and six months ended June 30, 2026, salary costs increased by $530,000 and $890,000, and insurance costs increased by $64,000 and $101,000, respectively. The costs for the newly purchased aircraft used to support business development and maintain client relationships were $276,000 and $438,000 for the three and six months ended June 30, 2026, respectively.

41

Research and Development Expense. Research and development expense of $2.2 million and $4.6 million for the three and six months ended June 30, 2026 increased by approximately $1.2 million or 115% and $2.4 million or 104% from research and development expense of $1.0 million and $2.3 million for the three and six months ended June 30, 2025, respectively. During the six months ended June 30, 2026 and 2025 the Company capitalized approximately $1.6 million and $1.7 million, respectively, of development costs in connection with its internal-use software. The increase in expense was primarily due to a shift in the nature of development activities, with fewer costs qualifying for capitalization as internal-use software, resulting in a greater portion of costs being recognized as operating expenses in the current period.

Change in Contingent Consideration. Change in contingent consideration of $(34,000) and $23,000 for the three and six months ended June 30, 2026 relates to adjustments for probable future payments required under the purchase agreement for certain acquisitions.

Depreciation Expense. Depreciation expense of $748,000 and $1.5 million for the three and six months ended June 30, 2026 increased by $154,000 and $333,000 from depreciation of $594,000 and $1.2 million for the three and six months ended June 30, 2025, respectively.

Amortization Expense. Amortization expense of $3.0 million and $6.3 million for the three and six months ended June 30, 2026 increased by $195,000 or 7% and $716,000 or 13% from amortization expense of $2.8 million and $5.6 million for the three and six months ended June 30, 2025, respectively. The increase in the expense is due to the amortization of the intangible assets acquired in the recent acquisitions.

Restructuring Costs. There were no restructuring costs for the three and six months ended June 30, 2026 as compared to $23,000 and $137,000 for the three and six months ended June 30, 2025, respectively, which primarily consists of severance and separation costs associated with the optimization of the Company’s operations and profitability improvements.

|  | Three Months Ended June 30, |  |  | Change |  |  | Six Months Ended June 30, |  |  | Change |
|  | 2026 |  |  | 2025 |  |  | Amount |  |  | Percent |  |  | 2026 |  |  | 2025 |  |  | Amount |  |  | Percent |
|  | ($ in thousands) |
Interest income |  | $ | 73 |  |  | $ | 51 |  |  | $ | 22 |  |  |  | 43 | % |  | $ | 83 |  |  | $ | 93 |  |  | $ | (10 | ) |  |  | (11 | %)
Interest expense |  |  | (815 | ) |  |  | (68 | ) |  |  | 747 |  |  |  | 1,099 | % |  |  | (873 | ) |  |  | (126 | ) |  |  | 747 |  |  |  | 593 | %
Other income (expense) - net |  |  | 104 |  |  |  | (35 | ) |  |  | 139 |  |  |  | 397 | % |  |  | 126 |  |  |  | (49 | ) |  |  | 175 |  |  |  | 357 | %
Income tax provision |  |  | 102 |  |  |  | 42 |  |  |  | 60 |  |  |  | 143 | % |  |  | 154 |  |  |  | 83 |  |  |  | 71 |  |  |  | 86 | %

Interest Income. Interest income of $73,000 and $83,000 for the three and six months ended June 30, 2026 increased by $22,000 and decreased by $10,000 from interest income of $51,000 and $93,000 for the three and six months ended June 30, 2025, respectively. The interest income represents late fees from customers and interest earned on temporary cash investments.

Interest Expense. Interest expense of $815,000 and $873,000 for the three and six months ended June 30, 2026, respectively, increased by $747,000 for both the three and six months periods from interest expense of $68,000 and $126,000, respectively, in 2025. The interest expense increase was due to the borrowings under the term loan and the line of credit during 2026. Interest expense on the term loan was $621,000 for both the three and six months ended June 30, 2026, and includes fees related to the term loan. Interest expense on the line of credit was $121,000 for both the three and six months ended June 30, 2026, and includes fees related to the line of credit.

Other Income (Expense)–net. Other income – net was $104,000 and $126,000 for the three and six months ended June 30, 2026 compared to other expense – net of $35,000 and $49,000 for the three and six months ended June 30, 2025, respectively. Other expense or income primarily represents foreign currency transaction gains or losses. These transaction gains or losses result from revaluing intercompany accounts which are denominated in U.S. dollars that represent amounts payable/receivable between the entities. Whenever the exchange rate varies, the gains or losses are recorded in the condensed consolidated statements of operations.

42

Income Tax Provision. The provision for income taxes was $102,000 and $154,000 for the three and six months ended June 30, 2026, respectively, compared to $42,000 and $83,000 for the three and six months ended June 30, 2025, respectively. The increase was primarily due to a $50,000 deferred income tax provision for the three and six months ended June 30, 2026 related to the amortization of goodwill for tax purposes. There was no deferred tax liability recorded at December 31, 2025. There were no deferred income taxes for the three months and six months ended June 30, 2025.

The current income tax expense for the three and six months ended June 30, 2026 was approximately $52,000 and $102,000, respectively, which represents state minimum taxes and foreign income taxes. Although the Company has returned to profitability, it incurred losses historically and there is uncertainty regarding sufficient future U.S. taxable income, which makes realization of deferred tax losses difficult to support in accordance with ASC 740. Accordingly, a valuation allowance was recorded against all deferred tax assets at June 30, 2026 and December 31, 2025.

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

Liquidity and Capital Resources

During April 2026, the Company terminated the credit line with Provident and entered into a $50 million joint credit facility with Citizens Bank, N.A. and Provident consisting of a four-year $40 million term loan and a $10 million revolving line of credit. As of June 30, 2026, there were $9.0 million outstanding on the line of credit and $39.2 million outstanding on the term loan. The Company fully redeemed the outstanding Series B Preferred Stock in May 2026. Approximately $41.6 million of the new credit facility was used for the redemption. As of June 30, 2025, there were no borrowings under the Provident credit facility.

As of June 30, 2026, the Company had total cash of $13.4 million and net working capital of $695,000. For the six months ended June 30, 2026, cash provided by operations was $10.7 million and cash provided by financing activities was $2.3 million, offset by cash used in investing activities of $3.2 million, resulting in an increase in cash of $9.8 million after accounting for the effect of $8,000 of exchange rate changes.

For the six months ended June 30, 2026, the Company recorded net income of $2.0 million. Management continues to focus on the Company’s overall profitability, including managing expenses, and to the extent possible growing revenue, and expects that these efforts will continue to enhance our liquidity and financial position. Our expectations regarding future financial performance, including revenue, adjusted EBITDA and earnings-per-share, are based on management’s current beliefs and assumptions regarding, among other things, the signing and continuation of certain client and vendor relationships, the anticipated timing and scope of client projects, and our timely execution of integration and expense-management initiatives intended to align our cost structure with those objectives. If these assumptions prove incorrect or these initiatives are delayed or not fully realized, our results may differ materially. Based on management’s forecasts, the Company will have sufficient liquidity to meet its obligations as they become due for the next twelve months from the date of the financial statements’ issuance.

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

43

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

|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |  |  | Change |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |  |  | Amount |  |  | Percent |
|  | ($ in thousands) |  |  |  |
Net cash provided by operating activities |  | $ | 7,073 |  |  | $ | 7,408 |  |  | $ | 10,684 |  |  | $ | 12,521 |  |  | $ | (2,098 | ) |  |  | (17 | %)
Net cash used in investing activities |  |  | (2,006 | ) |  |  | (1,993 | ) |  |  | (3,238 | ) |  |  | (3,503 | ) |  |  | 265 |  |  |  | 8 | %
Net cash provided by (used in) financing activities |  |  | 4,474 |  |  |  | (1,762 | ) |  |  | 2,324 |  |  |  | (3,694 | ) |  |  | 6,279 |  |  |  | 170 | %
Effect of exchange rate changes on cash and restricted cash |  |  | - |  |  |  | (18 | ) |  |  | 8 |  |  |  | (29 | ) |  |  | 37 |  |  |  | 128 | %
Net increase in cash and restricted cash |  | $ | 9,541 |  |  | $ | 3,635 |  |  | $ | 9,778 |  |  | $ | 5,295 |  |  | $ | 4,483 |  |  |  | 85 | %

The income before income taxes was $1.2 million and $2.2 million for the three and six months ended June 30, 2026, respectively, which included $3.7 million and $7.8 million of non-cash depreciation and amortization, respectively. The income before income taxes was $2.9 million and $4.9 million for the three and six months ended June 30, 2025, respectively, which included $3.4 million and $6.7 million of non-cash depreciation and amortization, respectively.

Operating Activities

Net cash provided by operating activities was $10.7 million and $12.5 million during the six months ended June 30, 2026 and 2025, respectively. There was a decrease in net income of $2.8 million together with the following changes in non-cash items: an increase in depreciation and amortization of $1.0 million and a decrease in stock-based compensation of $91,000. Accounts receivable decreased $827,000 and increased $958,000 for the six months ended June 30, 2026 and 2025, respectively. Accounts payable and other liabilities decreased by $2.1 million and increased $377,000 during the six months ended June 30, 2026 and 2025, respectively. Other assets decreased by $73,000 and increased by $838,000 during the six months ended June 30, 2026 and 2025, respectively.

Investing Activities

Net cash used in investing activities was $3.2 million and $3.5 million for the six months ended June 30, 2026 and 2025, respectively. Capital expenditures were $937,000 and $1.8 million for the six months ended June 30, 2026 and 2025, respectively. The capital expenditures for the six months ended June 30, 2026 and 2025 primarily represented computer equipment purchased and leasehold improvements for the Pakistan Offices. Software development costs of $1.6 million and $1.7 million for the six months ended June 30, 2026 and 2025, respectively, were capitalized in connection with the development of software for providing technology-enabled business solutions. Payment for acquisitions was $681,000 and $40,000 for the six months ended June 30, 2026 and 2025, respectively.

Financing Activities

Net cash provided by financing activities was $2.3 million during the six months ended June 30, 2026 compared to net cash used in financing activities of $3.7 million during the six months ended June 30, 2025. Cash provided by financing activities during the six months ended June 30, 2026 included $39.7 million of net proceeds from the term loan, $9 million of borrowings on the line of credit, offset by $6.4 million of preferred stock dividends, $1.2 million of repayments for debt obligations and $618,000 for payment of contingent consideration. Approximately $38.2 million was used for the redemption of the Series B Preferred stock. Cash used in financing activities during the six months ended June 30, 2025 included $3.3 million of preferred stock dividends, $355,000 of repayments for debt obligations and $22,000 of tax withholding obligations paid in connection with stock awards issued to employees.

Contractual Obligations and Commitments

We had contractual obligations under our Provident line of credit and have contractual obligations under the new credit facility obtained in April 2026. We were in compliance with all covenants as of June 30, 2026. We also maintain operating leases for property and certain office equipment. For additional information, see Contractual Obligations and Commitments under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 12, 2026.

44

Off-Balance Sheet Arrangements

As of June 30, 2026, and 2025, 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.

Cybersecurity Incident

On March 16, 2026, the Company detected a security incident in its CareCloud Health division that affected the functionality and data access to one of its six electronic health record environments for approximately eight hours until the Company fully restored all functionality and data access during that evening. The forensic investigation determined that an unauthorized third party gained access to one cloud account supporting the previously identified electronic health record environment and found no evidence that any other Company platforms, divisions, systems, data or environments were affected. The investigation found no evidence of unauthorized activity related to the incident after March 16, 2026 and all affected systems remain fully operational. Subject to applicable policy terms, limits, retentions, exclusions and coverage determinations, the Company currently believes its available cybersecurity insurance coverage is likely to be sufficient for the losses it currently anticipates in connection with the incident. See Note 9, Commitments and Contingencies, of the Notes to Condensed Consolidated Financial Statements for additional information regarding the incident, including related legal proceedings.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by 17 C.F.R. 229.10(f)(1) and are not required to provide information under this item, pursuant to Item 305(e) of Regulation S-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Interim Chief Financial Officer, based on the Internal Control-Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2026 as required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

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

Based on the evaluation of our disclosure controls and procedures, as of June 30, 2026, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective. We will continue to improve the controls to ensure that information required to be disclosed by the Company in reports that it files under the Exchange Act is reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Changes in Internal Control Over Financial Reporting

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

45

Part II. Other Information

Item 1. Legal Proceedings

See discussion of legal proceedings in “Note 9, Commitments and Contingencies” of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report, which is incorporated by reference herein.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I—Item 1A. “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 12, 2026, which could materially affect our business, financial condition and/or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, cash flows and/or future results.

The recent cybersecurity incident in our CareCloud Health division could result in material costs, regulatory action and reputational harm.

We experienced a cybersecurity incident involving unauthorized third party access to one cloud account supporting one of our CareCloud Health division electronic health record environments. The forensic investigation determined that an unauthorized third party claimed to have exfiltrated personally identifiable information and protected health information. While we have taken steps to contain and remediate the incident, including engaging third-party cybersecurity experts, notifying the affected healthcare customers, potentially affected individuals, and regulatory agencies, there can be no assurance that additional vulnerabilities will not be identified or that further unauthorized activity will not occur. The incident has resulted in, and may continue to result in, costs related to investigation, remediation, customer and patient notification, and legal proceedings. Additionally, this incident may harm our reputation, result in customer attrition, and expose us to regulatory penalties. We have provided notifications to applicable federal and state regulatory agencies as required. Regulatory agencies, including the U.S. Department of Health and Human Services Office for Civil Rights and state attorneys general, may open inquiries or investigations into the incident, which could result in fines, penalties, corrective action plans or other remedies, and responding to any such inquiries could involve costs and management attention. We may also face contractual claims from healthcare-provider customers, including indemnification claims or claims under business associate agreements. The incident may result in increased insurance premiums or retentions, or reduced availability of cybersecurity insurance on acceptable terms, and we expect to continue to incur costs to further enhance our information security safeguards. If our remediation efforts are not successful or timely, or if additional vulnerabilities are exploited, our business, financial condition, and results of operations could be materially adversely affected.

The use of artificial intelligence by threat actors, and our own development and deployment of AI-enabled products, may increase the risk and potential severity of future cybersecurity incidents.

Advances in AI have lowered the barriers to, and increased the sophistication of, cyberattacks, including AI-generated phishing and social-engineering campaigns, deepfake-enabled impersonation, and automated discovery and exploitation of vulnerabilities, and we expect the frequency and sophistication of such attacks to increase. In addition, our own AI solutions, including CareCloud cirrusAI and CareCloud stratusAI, process personally identifiable information and protected health information and rely on third-party models and cloud infrastructure, which may create new attack surfaces and data-handling risks. Although we have implemented and continue to enhance safeguards, we cannot guarantee these measures will prevent future incidents, and any future incident could result in costs, regulatory action, litigation, customer attrition and reputational harm materially greater than those associated with the March 2026 incident.

Geopolitical or economic developments affecting our offshore operations could increase our costs and impair our ability to service client accounts.

As described in our Annual Report on Form 10-K, our business model depends on our offshore operations in Pakistan, Azad Jammu and Kashmir and Sri Lanka, where approximately 3,100 of our team members are located and where personnel costs are significantly lower than in the United States. Regional conflicts or the escalation of tensions in or affecting the regions where we operate, trade restrictions, sanctions, changes in diplomatic relations or political stability, currency devaluation or restrictions on the repatriation of funds, infrastructure disruptions, visa or travel restrictions, and local wage inflation could increase our operating costs or impair our ability to deliver services to our clients at current service levels and prices. Because our offshore operations are concentrated in a small number of locations, a disruption affecting any one of them could have a disproportionate impact on our ability to deliver services. If we were required to shift a material portion of this work to the United States or other higher-cost locations, our expenses would increase materially, our margins would decline, and we may be unable to serve client accounts at current service levels or competitive prices.

We maintain our cash at financial institutions, often in balances that exceed federally insured limits.

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

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

On December 11, 2023, the Board of Directors suspended the monthly cash dividends for Series A Preferred Stock and Series B Preferred Stock beginning with the payment scheduled for December 15, 2023 together with the outstanding dividends that were declared. During this suspension, dividends continued to accumulate in arrears on the remaining Series A and Series B Preferred Stock. Effective in September 2024, there was a change in the dividend rate on the Series A Preferred Stock from 11.00% to 8.75%. Due to the conversion of the majority of the Series A Preferred Stock in March 2025, the dividend amount due on the converted shares resulting from the suspension was settled. During February 2025 and continuing monthly thereafter, the Company resumed payment of the dividends, paying one month of dividends in arrears each month based on the oldest dividend amount outstanding. Beginning in February 2026, the Company began making one additional dividend payment each month on the Series B Preferred Stock to begin to satisfy the dividend arrearage. Due to the redemption of all of the Series B Preferred Stock in May 2026, the dividend amount due on the redeemed Series B Preferred Stock shares resulting from the suspension was settled. The Company has approximately $2.7 million of dividends declared and accumulated on the Series A Preferred Stock due as of the filing date.

46

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

During the quarter ended June 30, 2026, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

Item 6. Exhibits

Exhibit Number |  | Exhibit Description
31.1 |  | Certification of the Company’s Principal Executive Officer pursuant to Rules 13a-14(a)/15d-14(a), of the Securities Exchange Act of 1934, as amended.
31.2 |  | Certification of the Company’s Principal Financial Officer pursuant to Rules 13a-14(a)/15d-14(a), of the Securities Exchange Act of 1934, as amended.
32.1* |  | Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2* |  | Certification of the Company’s Interim Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS |  | XBRL Instance
101.SCH |  | XBRL Taxonomy Extension Schema
101.CAL |  | XBRL Taxonomy Extension Calculation Linkbase
101.LAB |  | XBRL Taxonomy Extension Label Linkbase
101.PRE |  | XBRL Taxonomy Extension Presentation Linkbase
101.DEF 104 |  | XBRL Taxonomy Extension Definition Linkbase Cover Page Interactive Data File (embedded within the Inline XBRL document)

*The certifications on Exhibit 32 hereto are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

| CareCloud, Inc.
| By: | /s/ Stephen Snyder
|  | Stephen Snyder
|  | Chief Executive Officer
|  | Date: August 6, 2026
| By: | /s/ Norman S. Roth
|  | Norman S. Roth
|  | Interim Chief Financial Officer and Corporate Controller
|  | Date: August 6, 2026

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