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 September 30, 2023

☐

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
11% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per share	CCLDP	Nasdaq Global Market
8.75% Series B Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per share	CCLDO	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 October 27, 2023, the registrant had 15,873,120 shares of common stock, par value $0.001 per share, outstanding.

INDEX

		Page
Forward-Looking Statements		2

PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets at September 30, 2023 and December 31, 2022	4
	Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022	5
	Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended September 30, 2023 and 2022	6
	Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2023 and 2022	7
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	36
Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37
Signatures		38

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 2, 2023. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements, including without limitation, risks and uncertainties relating to:

	●	our ability to manage our growth, including acquiring, partnering with, and effectively integrating acquired businesses into our infrastructure and avoiding legal exposure and liabilities associated with acquired companies and assets;

	●	our ability to retain our clients and revenue levels, including effectively migrating new clients and maintaining or growing the revenue levels of our new and existing clients;

	●	our ability to maintain operations in our offshore offices in a manner that continues to enable us to offer competitively priced products and services;

	●	our ability to keep pace with a rapidly changing healthcare industry;

	●	our ability to consistently achieve and maintain compliance with a myriad of federal, state, foreign, local, payor and industry requirements, regulations, rules, laws and contracts;

	●	our ability to maintain and protect the privacy of confidential and protected Company, client and patient information;

	●	our ability to apply artificial intelligence effectively in driving value for our clients through technology-based solutions;

	●	our ability to develop new technologies, upgrade and adapt legacy and acquired technologies to work with evolving industry standards and third-party software platforms and technologies, and protect and enforce all of these and other intellectual property rights;

	●	our ability to attract and retain key officers and employees, and the continued involvement of Mahmud Haq as Executive Chairman and A. Hadi Chaudhry as Chief Executive Officer and President, all of which are critical to our ongoing operations, growing our business and integrating of our newly acquired businesses;

	●	our ability to comply with covenants contained in our credit agreement with our senior secured lender, Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, and other future debt facilities;

	●	our ability to pay our monthly preferred dividends to the holders of our Series A and Series B preferred stock;

	●	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 the ongoing COVID-19 pandemic and the impact it 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.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

CARECLOUD, INC.

CONSOLIDATED BALANCE SHEETS

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

	September 30,			December 31,
	2023			2022
	(Unaudited)
ASSETS
Current assets:
Cash	$	6,406		$	12,299
Accounts receivable - net		12,310			14,773
Contract asset		4,948			4,399
Inventory		478			381
Current assets - related party		50			16
Prepaid expenses and other current assets		3,299			2,785
Total current assets		27,491			34,653
Property and equipment - net		5,319			5,056
Operating lease right-of-use assets		4,491			4,921
Intangible assets - net		26,689			29,520
Goodwill		61,186			61,186
Other assets		745			838
TOTAL ASSETS	$	125,921		$	136,174
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,243		$	5,681
Accrued compensation		3,118			4,248
Accrued expenses		4,629			4,432
Operating lease liability (current portion)		1,810			2,273
Deferred revenue (current portion)		1,527			1,386
Notes payable (current portion)		490			319
Dividend payable		4,125			4,059
Total current liabilities		21,942			22,398
Notes payable		10			13
Borrowings under line of credit		12,000			8,000
Operating lease liability		2,789			3,207
Deferred revenue		422			342
Deferred tax liability		606			525
Total liabilities		37,769			34,485
COMMITMENTS AND CONTINGENCIES (NOTE 7)		-			-
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.001 par value - authorized 7,000,000 shares. Series A, issued and outstanding 4,526,231 shares at September 30, 2023 and December 31, 2022. Series B, issued and outstanding 1,463,392 and 1,344,128 shares at September 30, 2023 and December 31, 2022, respectively		6			6
Common stock, $0.001 par value - authorized 35,000,000 shares. Issued 16,598,449 and 15,970,204 shares at September 30, 2023 and December 31, 2022, respectively. Outstanding 15,857,650 and 15,229,405 shares at September 30, 2023 and December 31, 2022, respectively		17			16
Additional paid-in capital		123,872			130,987
Accumulated deficit		(30,789	)		(25,621	)
Accumulated other comprehensive loss		(4,292	)		(3,037	)
Less: 740,799 common shares held in treasury, at cost at September 30, 2023 and December 31, 2022		(662	)		(662	)
Total shareholders’ equity		88,152			101,689
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	125,921		$	136,174

See notes to consolidated financial statements.

CARECLOUD, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

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

	2023			2022			2023			2022
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
NET REVENUE	$	29,280		$	33,723		$	88,643		$	106,292
OPERATING EXPENSES:
Direct operating costs		18,260			20,406			53,843			64,866
Selling and marketing		2,337			2,504			7,529			7,314
General and administrative		5,482			6,500			16,518			18,479
Research and development		1,260			1,168			3,523			3,251
Change in contingent consideration		-			(1,660	)		-			(2,890	)
Depreciation and amortization		3,903			2,810			10,282			8,686
Net loss on lease terminations and unoccupied lease charges		8			307			430			928
Total operating expenses		31,250			32,035			92,125			100,634
OPERATING (LOSS) INCOME		(1,970	)		1,688			(3,482	)		5,658
OTHER:
Interest income		52			14			124			22
Interest expense		(352	)		(96	)		(829	)		(303	)
Other expense - net		(422	)		(495	)		(591	)		(300	)
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES		(2,692	)		1,111			(4,778	)		5,077
Income tax provision		57			55			204			144
NET (LOSS) INCOME	$	(2,749	)	$	1,056		$	(4,982	)	$	4,933

Preferred stock dividend		3,916			3,849			11,757			11,662
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(6,665	)	$	(2,793	)	$	(16,739	)	$	(6,729	)

Net loss per common share: basic and diluted	$	(0.42	)	$	(0.18	)	$	(1.07	)	$	(0.45	)
Weighted-average common shares used to compute basic and diluted loss per share		15,760,499			15,148,721			15,600,361			15,070,913

See notes to consolidated financial statements.

CARECLOUD, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

($ in thousands)

		2023			2022			2023			2022
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2023			2022			2023			2022
NET (LOSS) INCOME		$	(2,749	)	$	1,056		$	(4,982	)	$	4,933
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Foreign currency translation adjustment (a)	(a)		362			(537	)		(1,255	)		(1,782	)
COMPREHENSIVE (LOSS) INCOME		$	(2,387	)	$	519		$	(6,237	)	$	3,151

(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 consolidated financial statements.

CARECLOUD, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022

($ in thousands, except for number of shares)

	Shares			Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Stock			Equity
	Preferred Stock Series A					Preferred Stock Series B				Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Treasury (Common)			Total Shareholders’
	Shares			Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Stock			Equity
Balance - January 1, 2023 before adoption of ASC 326		4,526,231		$	5		1,344,128	$	1		15,970,204	$	16	$	130,987		$	(25,621	)	$	(3,037	)	$	(662	)	$	101,689
Cumulative effect of adopting ASC 326		-			-		-		-		-		-		-			(186	)		-			-			(186	)
Balance - January 1, 2023 after adoption		4,526,231			5		1,344,128		1		15,970,204		16		130,987			(25,807	)		(3,037	)		(662	)		101,503
Net loss		-			-		-		-		-		-		-			(401	)		-			-			(401	)
Foreign currency translation adjustment		-			-		-		-		-		-		-			-			(1,711	)		-			(1,711	)
Issuance of stock under the equity incentive plan		-			-		41,491		-		343,203		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-		-		-		-		-		1,185			-			-			-			1,185
Shares issued for services		-			-		-		-		20,000		-		-			-			-			-			-
Issuance of Series B Preferred Stock		-			-		59,773		-		-		-		1,437			-			-			-			1,437
Preferred stock dividends		-			-		-		-		-		-		(3,931	)		-			-			-			(3,931	)
Balance - March 31, 2023		4,526,231		$	5		1,445,392	$	1		16,333,407	$	16	$	129,678		$	(26,208	)	$	(4,748	)	$	(662	)	$	98,082

Balance - April 1, 2023		4,526,231		$	5		1,445,392	$	1		16,333,407	$	16	$	129,678		$	(26,208	)	$	(4,748	)	$	(662	)	$	98,082
Net loss		-			-		-		-		-		-		-			(1,832	)		-			-			(1,832	)
Foreign currency translation adjustment		-			-		-		-		-		-		-			-			94			-			94
Issuance of stock under the equity incentive plan		-			-		9,000		-		15,489		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-		-		-		-		-		1,089			-			-			-			1,089
Shares issued for services		-			-		-		-		20,000		-		-			-			-			-			-
Preferred stock dividends		-			-		-		-		-		-		(3,910	)		-			-			-			(3,910	)
Balance - June 30, 2023		4,526,231		$	5		1,454,392	$	1		16,368,896	$	16	$	126,857		$	(28,040	)	$	(4,654	)	$	(662	)	$	93,523

Balance - July 1, 2023		4,526,231		$	5		1,454,392	$	1		16,368,896	$	16	$	126,857		$	(28,040	)	$	(4,654	)	$	(662	)	$	93,523
Net loss		-			-		-		-		-		-		-			(2,749	)		-			-			(2,749	)
Foreign currency translation adjustment		-			-		-		-		-		-		-			-			362			-			362
Issuance of stock under the equity incentive plan		-			-		9,000		-		229,553		1		-			-			-			-			1
Stock-based compensation, net of cash settlements		-			-		-		-		-		-		931			-			-			-			931
Preferred stock dividends		-			-		-		-		-		-		(3,916	)		-			-			-			(3,916	)
Balance - September 30, 2023		4,526,231		$	5		1,463,392	$	1		16,598,449	$	17	$	123,872		$	(30,789	)	$	(4,292	)	$	(662	)	$	88,152

Balance - January 1, 2022		5,299,227		$	5		-	$	-		15,657,641	$	16	$	131,379		$	(31,053	)	$	(1,754	)	$	(662	)	$	97,931
Net income		-			-		-		-		-		-		-			1,140			-			-			1,140
Foreign currency translation adjustment		-			-		-		-		-		-		-			-			(255	)		-			(255	)
Issuance of stock under the equity incentive plan		22,319			-		-		-		145,809		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-		-		-		-		-		887			-			-			-			887
Redemption of Series A Preferred Stock		(800,000	)		-		-		-		-		-		(20,000	)		-			-			-			(20,000	)
Issuance of Series B Preferred Stock		-			-		1,150,372		1		-		-		26,637			-			-			-			26,638
Stock issuance costs		-			-		-		-		-		-		(11	)		-			-			-			(11	)
Preferred stock dividends		-			-		-		-		-		-		(4,037	)		-			-			-			(4,037	)
Balance - March 31, 2022		4,521,546		$	5		1,150,372	$	1		15,803,450	$	16	$	134,855		$	(29,913	)	$	(2,009	)	$	(662	)	$	102,293

Balance - April 1, 2022		4,521,546		$	5		1,150,372	$	1		15,803,450	$	16	$	134,855		$	(29,913	)	$	(2,009	)	$	(662	)	$	102,293
Net income		-			-		-		-		-		-		-			2,737			-			-			2,737
Foreign currency translation adjustment		-			-		-		-		-		-		-			-			(990	)		-			(990	)
Issuance of stock under the equity incentive plan		4,685			-		10,000		-		15,809		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-		-		-		-		-		1,257			-			-			-			1,257
Redemption of Series A Preferred Stock		-			-		-		-		-		-		(5	)		-			-			-			(5	)
Issuance of Series B Preferred Stock		-			-		49,876		-		-		-		1,223			-			-			-			1,223
Stock issuance costs		-			-		-		-		-		-		(10	)		-			-			-			(10	)
Preferred stock dividends		-			-		-		-		-		-		(3,776	)		-			-			-			(3,776	)
Balance - June 30, 2022		4,526,231		$	5		1,210,248	$	1		15,819,259	$	16	$	133,544		$	(27,176	)	$	(2,999	)	$	(662	)	$	102,729

Balance - July 1, 2022		4,526,231		$	5		1,210,248	$	1		15,819,259	$	16	$	133,544		$	(27,176	)	$	(2,999	)	$	(662	)	$	102,729
Balance		4,526,231		$	5		1,210,248	$	1		15,819,259	$	16	$	133,544		$	(27,176	)	$	(2,999	)	$	(662	)	$	102,729
Net income		-			-		-		-		-		-		-