Healthcare Triangle(HCTI) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for Healthcare Triangle, Inc. for the quarterly period ended March 31, 2025, including Balance Sheets, Statements of Operations, Statements of Changes in Stockholders' Equity, Statements of Cash Flows, and accompanying notes Unaudited Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of March 31, 2025, compared to December 31, 2024 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $6,826 | $20 | +$6,806 | | Total current assets | $9,840 | $1,452 | +$8,388 | | Total assets | $11,785 | $1,961 | +$9,824 | | Liabilities & Equity | | | | | Total current liabilities | $3,208 | $6,575 | -$3,367 | | Total liabilities | $3,208 | $7,075 | -$3,867 | | Total stockholders' equity (deficit) | $8,577 | $(5,114) | +$13,691 | - The company's financial position significantly improved, moving from a stockholders' deficit of $(5.1) million to a positive equity of $8.6 million, primarily driven by a substantial increase in cash from financing activities[20] Unaudited Condensed Consolidated Statements of Operations This section outlines the company's financial performance over the quarter, detailing revenues, costs, and net loss for Q1 2025 compared to Q1 2024 Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Net revenue | $3,704 | $4,109 | -9.9% | | Cost of revenue | $3,375 | $3,095 | +9.0% | | Loss from operations | $(1,398) | $(1,713) | +18.4% | | Net loss | $(1,700) | $(1,862) | +8.7% | | Net loss per share (basic and diluted) | $(0.17) | $(0.42) | +59.5% | - Despite a 9.9% decrease in net revenue and a 9.0% increase in cost of revenue, the company reduced its net loss by 8.7% year-over-year, primarily due to a significant reduction in total operating expenses from $2.7 million to $1.7 million[22] Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) This section details the changes in the company's equity position, including the impact of net loss, stock issuances, and debt conversions - Stockholders' equity turned from a deficit of $(5.1) million at the end of 2024 to a positive $8.6 million at the end of Q1 2025[25] - Key activities impacting equity in Q1 2025 included a net loss of $(1.7) million, issuance of common stock and warrants for cash (raising $15.2 million gross), and conversion of debt to equity ($1.2 million)[25][111] Unaudited Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities, highlighting the net change in cash for the period Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,557) | $(50) | | Net cash provided by/ (used in) investing activities | $0 | $0 | | Net cash provided by/ (used in) financing activities | $12,363 | $(883) | | Net increase (decrease) in cash | $6,806 | $(933) | - The company's cash position increased significantly due to $12.4 million in net cash from financing activities, which included $13.7 million from an equity issuance, offsetting a $5.6 million cash use in operations[30] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures regarding the accounting policies, significant transactions, and financial data presented in the consolidated financial statements - The company provides IT and data services to the Healthcare and Life Sciences (HCLS) industry, focusing on digital transformation, security, data lifecycle management, and interoperability[32][33] Revenue by Segment (Q1 2025 vs Q1 2024, in thousands) | Segment | Q1 2025 Revenue | Q1 2024 Revenue | Change % | | :--- | :--- | :--- | :--- | | Software services | $1,652 | $2,025 | (18)% | | Managed services and support | $1,982 | $1,996 | (1)% | | Platform services | $70 | $88 | (20)% | | Total Revenue | $3,704 | $4,109 | (10)% | - The company has significant customer concentration, with the top 5 customers accounting for 57% of total revenue in Q1 2025, down from 70% in Q1 2024[87][50][51] - On February 27, 2025, the company entered into a securities purchase agreement for a private placement, raising gross proceeds of approximately $15.2 million ($13.68 million net)[106][108] - During Q1 2025, the company converted $875,000 of principal from the L1 Capital convertible note into 2,629,039 shares and repaid a $1,500,000 convertible note to Pioneer Garage[120][121][122] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance for the first quarter of 2025 compared to 2024, covering revenue changes, operating expenses, segment performance, and an improved liquidity position due to significant financing activities Results of Operations This section provides a detailed analysis of the company's revenue, cost of revenue, and operating expenses, explaining the factors contributing to the financial results for the quarter Overall Performance (Q1 2025 vs Q1 2024, in thousands) | Metric | Q1 2025 | Q1 2024 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Revenue | $3,704 | $4,109 | $(405) | (10)% | | Cost of Revenue | $3,375 | $3,095 | $280 | 9% | | Sales and Marketing | $373 | $883 | $(510) | (58)% | | Depreciation and Amortization | $12 | $536 | $(524) | (98)% | | Interest Expense | $413 | $149 | $264 | 177% | - Revenue decreased by 10% YoY, driven by declines across all segments: Software Services (-14%), Managed Services and Support (-5%), and Platform Services (-20%)[215] - The company is strategically shifting focus from non-recurring Software Services to recurring Managed Services and Platform Services to enhance long-term growth and customer retention[216] - Cost of revenue for Managed Services and Support increased by 29% YoY, while it decreased for Software Services (-5%) and Platform Services (-84%)[217] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations, detailing cash flow activities and the impact of recent financing on its liquidity position - The company's liquidity position has significantly improved, with cash and cash equivalents increasing to $6.8 million as of March 31, 2025, from $0.3 million a year prior[223][224] - The current ratio improved to 3.0 as of March 31, 2025, compared to 0.7 at the end of 2024, indicating a much stronger ability to meet short-term obligations[220] Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash flows used in operating activities | $(5,557) | $(50) | | Cash flows provided by / (used in) financing activities | $12,363 | $(883) | - Management believes existing cash will be sufficient to meet working capital needs for the next 12 months[225] Quantitative and Qualitative Disclosures About Market Risk The company states that it does not have investments and does not use derivative financial instruments, indicating minimal exposure to market risks such as interest rate fluctuations - The company does not utilize derivative financial instruments to manage interest rate risks[231] Controls and Procedures This section confirms management's evaluation of the company's disclosure controls and procedures, concluding their effectiveness as of March 31, 2025, with no material changes to internal control over financial reporting identified - Management, including the COO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025[232] - There were no changes to internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls[233] PART II - OTHER INFORMATION Legal Proceedings The company reports that it is not currently involved in any material legal proceedings outside the ordinary course of business - The company is involved in routine litigation that arises in the ordinary course of business but is not currently involved in any claims expected to be material to its financial condition or results[236] Risk Factors The company states that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K filed on March 31, 2025 - As of the filing date, there have been no material changes to the risk factors disclosed in the company's most recent Annual Report on Form 10-K[237] Unregistered Sales of Equity Securities and Use of Proceeds This section discloses a private placement of equity securities that occurred on February 27, 2025, where the company sold 36,190,485 units to institutional investors, each unit comprising common stock or a pre-funded warrant, a Series A Warrant, and a Series B Warrant - On February 27, 2025, the company entered into agreements with institutional investors for a private placement of 36,190,485 units at a price of $0.42 per unit[238] Defaults Upon Senior Securities The company reports that this item is not applicable - Not applicable[239] Mine Safety Disclosures The company reports that this item is not applicable - Not applicable[239] Other Information The company reports that there is no other information to disclose for this item - None[239] Exhibits This section lists all the exhibits filed with the Form 10-Q, including corporate governance documents, forms of warrants and securities purchase agreements related to the February 2025 financing, employment agreements, and Sarbanes-Oxley certifications - Lists exhibits filed with the report, including forms of Series A/B Warrants, the Securities Purchase Agreement, and officer certifications[240]