Company: HCTI
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001213900-25-076686
Chunk: 44

Company: Healthcare Triangle, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 1
Chunk 44
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. Our subscription arrangements
will be considered service contracts, and the customer will not have the right to take possession of the software. Segment wise revenue
breakup.

Cost of Revenue

Cost of revenue consists primarily of employee-related
costs associated with the rendering of our services, including salaries, benefits and stock-based compensation expense, the cost of subcontractors,
travel costs, cloud hosting charges and allocated overhead the cost of providing professional services is significantly higher as a percentage
of the related revenues than for our subscription services due to the direct labor costs and costs of subcontractors. Our business and
operational models are designed to be highly scalable and leverage variable costs to support revenue-generating activities. 

While we may grow our headcount overtime to capitalize
on our market opportunities, we believe our increased investment in automation, electronic health record integration capabilities, and
economies of scale in our operating model, will position us to grow our platform solutions revenue at a greater rate than our cost of
revenue.

In the current period, the gross margin generated
by the Company has been reduced to 14% and 11% in the 3 months and 6 months ended June 30th, 2025,  as compared to 30%
and 27% in the 3 months and 6 months ended June 30th, 2024, respectively.  This is due to the acquisition and onboarding
of the SecureKloud contracts, which had been negotiated at lower margins prior to the acquisition.  Going forward, all new contracts
are being negotiated at higher margins and as a result we expect that profit margins to increase materially over the next few quarters.

Operating Expenses

Research and Development

Research and development expense (majorly our
investment in innovation) consists primarily of employee-related expenses, including salaries, benefits, incentives, employment taxes,
severance, and equity compensation costs for our software developers, engineers, analysts, project managers, and other employees engaged
in the development and enhancement of our cloud-based platform applications. Research and development expenses also include certain third-party
consulting fees. Our research and development expense excludes any depreciation and amortization.

We expect to continue our focus on developing
new product offerings and enhancing our existing product offerings. As a result, we expect our future research and development expense
to increase in absolute dollars, although it may vary from period to period as a percentage of revenue.

34

Sales and Marketing

Sales and marketing expense consists primarily
of employee-related expenses,