What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-02-25 compared with 2020-02-28 · 338 added, 311 removed, 441 unchanged (60% of the section changed)

4 unchanged sentences

have not declared a cash dividend on our common stock since we became public on July 23, 2014, and currently we do not anticipate

paying any cash dividends to holders of our common stock.

The Company is prohibited from paying any dividends on common stock

without the prior written consent of its senior lender, SVB.

paying any cash dividends to holders of our common stock in the foreseeable future.

The Company is prohibited from paying any

dividends on common stock without the prior written consent of its senior lender, SVB.

Sales of Unregistered Securities

5 unchanged sentences

plan approved by the Company’s Board of Directors.

Compensation Plan Information

Equity Compensation Plan Information

Plan Category

securities to

be issued upon

Number of securities

remaining available for

future issuance under

equity incentive plan

(excluding securities to

be issued upon vesting)

Number of securities to be issued upon vesting

Number of securities remaining available for future issuance under equity incentive plan (excluding securities to be issued upon vesting)

Equity compensation plan approved by security holders - common shares

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Note 3 of our Consolidated Financial Statements discusses the acquisitions in the last

Statements of Operations Data

Consolidated Statements of Operations Data

Years ended December 31,

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Depreciation and amortization

Restructuring and impairment charges

Restructuring, impairment and unoccupied lease charges

Total operating expenses

Operating income (loss)

Interest expense - net

Other (expense) income - net

Operating (loss) income

Interest income - net

Other income (expense) - net

Loss before provision (benefit) for income taxes

3 unchanged sentences

Weighted average common shares outstanding basic and diluted

Net loss per common share basic and diluted

Net loss per common share:

basic and diluted

Consolidated Balance Sheet Data

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EBITDA represents net income (loss) before income tax expense, interest income, interest expense, depreciation, amortization,

transaction, integration, restructuring and impairment charges and change in contingent consideration.

Our management uses adjusted

EBITDA as a financial measure to evaluate the profitability and efficiency of our business model.

We use this non-GAAP financial

measure to assess the strength of the underlying operations of our business.

These adjustments, and the non-GAAP financial measure

that is derived from them, provide supplemental information to analyze our operations between periods and over time.

should consider our non-GAAP financial measure in addition to, and not as a substitute for, financial measures prepared in accordance

transaction, integration, restructuring, impairment charges, unoccupied lease charges and change in contingent consideration.

Our management uses adjusted EBITDA as a financial measure to evaluate the profitability and efficiency of our business model.

We use this non-GAAP financial measure to assess the strength of the underlying operations of our business.

These adjustments,

and the non-GAAP financial measure that is derived from them, provide supplemental information to analyze our operations between

periods and over time.

Investors should consider our non-GAAP financial measure in addition to, and not as a substitute for, financial

measures prepared in accordance with GAAP.

following table contains a reconciliation of net loss to adjusted EBITDA.

8 unchanged sentences

Transaction and integration costs

Restructuring and impairment charges

Restructuring, impairment and unoccupied lease charges

Change in contingent consideration

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on page 2 of this Annual Report on Form 10-K.

Company is a healthcare information technology company that provides a suite of proprietary web-based solutions and business services

to healthcare providers.

Our integrated Software-as-a-Service (“SaaS”) platform and business services are designed

to help our clients increase revenues, streamline workflows and make better business and clinical decisions, while reducing administrative

burdens and operating costs.

These solutions and services include:

cycle management (“RCM”) services;

Proprietary, healthcare IT solutions, which is part of our RCM services, including:

health records,

management software and related tools,

Health (“mHealth”) solutions,

claims clearinghouse, and

Company is a healthcare information technology company that provides a full suite of proprietary cloud-based solutions, together

with related business services to healthcare providers and hospitals throughout the United States.

Our integrated Software-as-a-Service

(“SaaS”) platform includes revenue cycle management (“RCM”), practice management (“PM”), electronic

health record (“EHR”), business intelligence, telehealth, patient experience management (“PXM”) solutions

and complementary software tools and business services for high-performance medical groups and health systems.

At a high level,

these solutions can be categorized as follows:

services, which include end-to-end medical billing, eligibility, analytics, and related services, all of which can often be

provided either with our technology platform or through a third-party system.

healthcare IT software solutions, which can be bundled with our RCM services, including:

which are easy to use, integrated with our business services or offered as SaaS solutions, and allow our healthcare provider

clients to deliver better patient care, document their clinical visits effectively and thus potentially qualify for government

incentives, reduce documentation errors and reduce paperwork;

software and related tools, which support our clients’

day-to-day business operations and workflows;

Health (“mHealth”) solutions, including smartphone applications that assist patients and healthcare providers

in the provision of healthcare services;

solutions, which allow healthcare providers to conduct remote patient visits;

claims clearinghouse, which enables our clients to electronically scrub and submit claims to, and process payments from, insurance

intelligence, customized applications, interfaces and a variety of other technology solutions that support our healthcare

purchasing services.

Comprehensive

practice management services;

offshore operations in Pakistan and Sri Lanka together accounted for approximately 14% and 22% of total expenses for the years

ended December 31, 2019 and 2018, respectively.

A significant portion of those expenses were personnel-related costs (approximately

78% and 79% of foreign costs for the years ended December 31, 2019 and 2018, 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.

All of the medical billing companies that we have acquired used

domestic labor or subcontractors from higher cost locations to provide all or a substantial portion of their services.

able to achieve significant cost reductions as we shift these labor costs to our offshore operations.

Office Practice Management Services are provided to medical practices.

In this service model, we provide the medical practice

with appropriate facilities, equipment, supplies, support services and administrative support staff.

We also provide management,

bill-paying and financial advisory services.

offshore operations in our Pakistan Offices and Sri Lanka together accounted for approximately 10% and 14% of total

expenses for the years ended December 31, 2020 and 2019, respectively.

A significant portion of those expenses were personnel-related

costs (approximately 79% and 78% of foreign costs for the years ended December 31, 2020 and 2019, respectively).

Because personnel-related

costs are significantly lower in our Pakistan Offices 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.

All of the medical billing

companies that we have acquired used domestic labor or subcontractors from higher cost locations to provide all or a substantial

portion of their services.

We are able to achieve significant cost reductions as we shift these labor costs to our offshore operations.

Performance Measures

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Restructuring,

and impairment charges;

impairment and unoccupied lease charges;

in contingent consideration.

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GAAP net loss

Provision (benefit) for income taxes

Provision for income taxes

Net interest expense

Foreign exchange loss (gain) / other expense

Foreign exchange loss / other expense

Stock-based compensation expense

1 unchanged sentence

Transaction and integration costs

Restructuring and impairment charges

Restructuring, impairment and unoccupied lease charges

Change in contingent consideration

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Restructuring,

and impairment charges;

impairment and unoccupied lease charges;

in contingent consideration.

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GAAP net loss

Provision (benefit) for income taxes

Provision for income taxes

Net interest expense

Other expense (income) - net

GAAP operating income (loss)

Other (income) expense - net

GAAP operating (loss) / income

GAAP operating margin

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Transaction and integration costs

Restructuring and impairment charges

Restructuring, impairment and unoccupied lease charges

Change in contingent consideration

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Restructuring,

and impairment charges;

impairment and unoccupied lease charges;

in contingent consideration;

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has sufficient carry forward losses to offset the applicable income taxes.

following table shows our reconciliation of GAAP net loss to non-GAAP adjusted net income for the years ended December 31, 2019

thousands except for per share amounts)

exchange loss (gain) / other expense

compensation expense

of purchased intangible assets

and integration costs

Restructuring

and impairment charges

in contingent consideration

tax expense (benefit) related to goodwill

adjusted net income

The following table shows our reconciliation of GAAP

net loss to non-GAAP adjusted net income for the years ended December 31, 2020 and 2019:

($ in thousands except for per share amounts)

GAAP net loss

Foreign exchange loss / other expense

Stock-based compensation expense

Amortization of purchased intangible assets

Transaction and integration costs

Restructuring, impairment and unoccupied lease charges

Change in contingent consideration

Income tax (benefit) expense related to goodwill

Non-GAAP adjusted net income

GAAP net loss attributable to common shareholders, per share

1 unchanged sentence

Net loss per end-of-period share

Foreign exchange loss (gain) / other expense

Foreign exchange loss / other expense

Stock-based compensation expense

1 unchanged sentence

Transaction and integration costs

Restructuring and impairment charges

Restructuring, impairment and unoccupied lease charges

Change in contingent consideration

Income tax expense (benefit) related to goodwill

Non-GAAP adjusted net income per share

End-of-period shares

purposes of determining non-GAAP adjusted net income per share, the Company used the number of common shares outstanding at the

end of the years December 31, 2019 and 2018.

Non-GAAP adjusted net income per share does not take into account dividends paid

on Preferred Stock.

No tax effect has been provided in computing non-GAAP adjusted net income and non-GAAP adjusted net income

per common share as the Company has sufficient carry forward net operating losses to offset the applicable income taxes.

Income tax (benefit) expense related to goodwill

Non-GAAP adjusted earnings per share

End-of-period common shares

In-the-money warrants and outstanding unvested RSUs

Total fully diluted shares

Non-GAAP adjusted diluted earnings per share

purposes of determining non-GAAP adjusted earnings per share, the Company used the number of common shares outstanding at the

end of December 31, 2020 and 2019.

Non-GAAP adjusted diluted earnings per share was computed using an as-converted method and

includes warrants that are in-the-money as of that date as well as outstanding unvested RSUs.

Non-GAAP adjusted earnings per share

and non-GAAP adjusted diluted earnings per share do not take into account dividends paid on Preferred Stock.

No tax effect has

been provided in computing non-GAAP adjusted earnings per share and non-GAAP adjusted diluted earnings per share as the Company

has sufficient carry forward net operating losses to offset the applicable income taxes.

Results of Operations

September 30,

($ in thousands, except per share data)

operating costs

and marketing

and administrative

and development

in contingent consideration

and amortization

Restructuring

and impairment charges

Operating expenses:

income (loss)

expense - net

(expense) income - net

(loss) before provision for income taxes

tax provision (benefit)

income (loss)

stock dividend

loss attributable to common shareholders

per common share Basic and diluted

Direct operating costs

Selling and marketing

General and administrative

Research and development

Change in contingent consideration

Depreciation and amortization

Restructuring, impairment and unoccupied lease charges

Total operating expenses

Operating income (loss)

Interest expense - net

Other (expense) income - net

Income (loss) before provision for income taxes

Income tax provision (benefit)

Net income (loss)

Preferred stock dividend

Net loss attributable to common shareholders

Loss per common share:

Basic and diluted

Adjusted EBITDA

Reconciliation

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Transaction and integration costs

Restructuring and impairment charges

Restructuring, impairment and unoccupied lease charges

Change in contingent consideration

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Our renewal rates for 2020 and 2019 were 88% and 90%, respectively.

We primarily derive our revenues from bundled revenue cycle management services, typically billed as a percentage of payments

collected by our customers.

This fee includes RCM, as well as the ability to use our EHR and practice management software as part

of the bundled fee.

These payments accounted for approximately 67% and 76% of our revenues during the years ended December 31,

We primarily derive our revenues from revenue cycle management services and bundled services, reported in our Healthcare IT

segment, which is typically billed as a percentage of payments collected by our customers.

This fee includes RCM, as well as the

ability to use our EHR and practice management software as part of the bundled fee.

These bundled fees are included in revenue

cycle management revenue.

These services accounted for approximately 62% and 66% of our revenues during the years ended December

31, 2020 and 2019, respectively.

This includes customers utilizing our proprietary product suite, PracticePro ®

well as customers from acquisitions which we are servicing utilizing third-party software.

as well as customers from acquisitions which we are servicing utilizing third-party software.

Key drivers of our revenue include

growth in the number of providers we are servicing, the number of patients served by those providers, and collections by those

We also generate revenue from our practice management and group purchasing services which began in July 2018 as a result

of the Orion acquisition.

Revenue is also generated from transcription, coding, indexing and other ancillary services.

end of 2019 and 2018, we moved approximately 52% and 57%, respectively, of the medical billing customers from prior years’

acquisitions that were on other platforms to our operating platform.

Software-as-a-service

(“SaaS”) fees, for clients not utilizing revenue cycle management services, accounted for approximately 18% and 1%

of revenue during the year ended December 31, 2020 and 2019, respectively.

When clients utilize our revenue cycle management services,

basic SaaS services are included at no additional charge.

We also generate revenue from our practice management and group purchasing

services which began in July 2018 as a result of the Orion acquisition.

Revenue is also generated from transcription, coding,

indexing and other ancillary services.

earned approximately 6% and 8% of our revenue from printing and mailing operations, clearinghouse, EDI services and ancillary

RCM services during the years ended December 31, 2020 and 2019, respectively.

We earned approximately 2% of our revenue from group

purchasing services during the same period.

We earned approximately 1% and 2% of our revenue

from group purchasing services during the years ended December 31, 2020 and 2019, respectively.

also earned approximately 11% and 21% of our revenue from practice management services, including reimbursement of certain costs

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practice management services and group purchasing services on July 1, 2018.

In December 2019, we began the launch of the telemedicine

In December 2019, we launched the telehealth service.

Revenues from the telehealth source were approximately $7,000 for the year ended December 31, 2020 and are included within our

revenue cycle management services revenue.

Operating Costs.

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operating costs do not include depreciation and amortization, which are broken out separately in the consolidated statements of

Our Pakistan and Sri Lanka operations together accounted for approximately 13% and 22% of direct operating costs for

the years ended December 31, 2019 and 2018, respectively.

As we grow, we expect to achieve further economies of scale and to see

our direct operating costs decrease as a percentage of revenue.

Operations in our Pakistan Offices and Sri Lanka together accounted for approximately 10% and 13% of direct operating

costs for the years ended December 31, 2020 and 2019, respectively.

As we grow, we expect to achieve further economies of scale

and to see our direct operating costs decrease as a percentage of revenue.

and Marketing Expense.

3 unchanged sentences

Research and development expense consists primarily of personnel-related costs and third-party contractor

Because we incorporate our technology into our services as soon as technological feasibility is established, most costs

are currently expensed as incurred.

and Administrative Expense.

1 unchanged sentence

employees, including compensation, benefits, travel, occupancy and insurance, software license fees and outside professional fees.

Our Pakistan and Sri Lanka offices accounted for approximately 16% and 20% of general and administrative expenses for the years

ended December 31, 2019 and 2018, respectively.

Our Pakistan Offices and Sri Lanka office accounted for approximately 15% and 16% of general and administrative expenses for the

years ended December 31, 2020 and 2019, respectively.

Consideration.

1 unchanged sentence

the amount of which is based on the achievement of defined performance measures contained in the purchase agreements.

at December 31, 2018 was payable in cash and the remaining balance was settled during 2019.

Contingent consideration is adjusted

to fair value at the end of each reporting period.

consideration is adjusted to fair value at the end of each reporting period.

and Amortization Expense.

6 unchanged sentences

on a straight-line basis over a period of twelve years.

Restructuring,

Impairment and Unoccupied Lease Charges .

Restructuring charges represent the remaining lease costs for a facility no longer

used by the Company as the employees were transferred to another Company facility.

Impairment charges represent charges recorded

for a leased facility no longer being used by the Company.

Unoccupied lease charges represent the portion of lease and related

costs for vacant space not being utilized by the Company.

The Company is marketing both the unused facilities and the unused space

for sub-lease.

In February 2021, the Company was able to settle one lease obligation.

and Other Income (Expense).

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Our other income (expense)

results primarily from foreign currency transaction gains (losses), and amounted to a foreign exchange loss of $827,000 and a

gain $435,000 for the years ended December 31, 2019 and 2018, respectively.

In preparing our consolidated financial statements, we estimate income taxes in each of the jurisdictions in which we

results primarily from foreign currency transaction gains (losses), and amounted to a foreign exchange gain of $14,000 and a loss

of $827,000 for the years ended December 31, 2020 and 2019, respectively.

In preparing our consolidated financial statements, we estimate income taxes in each of the jurisdictions in which

This process involves estimating actual current tax exposure together with assessing temporary differences resulting

29 unchanged sentences

to make difficult, subjective, or complex adjustments, and to make estimates about the effect of matters that are inherently uncertain.

As a result of our adoption of the new revenue recognition standard on January 1, 2018, we re-assessed the estimates, assumptions,

and judgments that are most critical in our recognition of revenue.

from Contracts with Customers :

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Our revenue recognition policies

require us to make significant judgments and estimates, particularly as it relates to revenue cycle management and group purchasing

Under ASC 606, certain significant accounting estimates, such as payment-to-charge ratios, effective billing rates and

the estimated contractual payment periods are required to measure the revenue cycle management revenue.

To measure group purchasing

services revenue, we need to estimate the number of providers purchasing vaccines and the amount and timing of those purchases.

We analyze various factors including, but not limited to, contractual terms and conditions, the credit-worthiness of our customers

and our pricing policies.

Changes in judgment on any of the above factors could materially impact the timing and amount of revenue

recognized in a given period.

require us to make significant judgments and estimates, particularly as it relates to revenue cycle management.

Under ASC 606,

certain significant accounting estimates, such as payment-to-charge ratios, effective billing rates and the estimated contractual

payment periods are required to measure the revenue cycle management revenue.

To measure group purchasing services revenue, we

need to estimate the number of providers purchasing vaccines and the amount and timing of those purchases.

We analyze various

factors including, but not limited to, contractual terms and conditions, the credit-worthiness of our customers and our pricing

Changes in judgment on any of the above factors could materially impact the timing and amount of revenue recognized

in a given period.

is recognized as the performance obligations are satisfied.

1 unchanged sentence

revenue cycle management

services, practice management services, professional services, ancillary services, group purchasing services, printing and mailing

services, and clearinghouse and EDI (electronic data interchange) services.

All of our revenue arrangements are based on contracts

with customers.

services, SaaS, practice management services, professional services, ancillary services, group purchasing services, printing and

mailing services, and clearinghouse and EDI (electronic data interchange) services.

All of our revenue arrangements are based

on contracts with customers.

Most of our 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.

or transaction prices are based on the contractual price for the service, which is consistent with the stand-alone selling price.

For contracts where

we provide multiple services such as where we perform multiple ancillary services, each service represents its own performance

Selling or transaction prices are based on the contractual price for the service, which is consistent with the stand-alone

selling price.

cycle management services:

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using the input method.

purchasing services:

estimate the variable consideration which we expect to be entitled to for the group purchasing services based upon anticipated

shipments to the medical providers enrolled in the program, seasonality and the changes in the number of providers.

of variable consideration includes adjusting historical data for anticipated changes from prior periods.

When reviewing our estimates,

in order to ensure that our estimates do not pose a risk of significantly overstating our revenue in any reporting period, we

will apply constraints, when appropriate, to certain estimates around our variable consideration.

Variable consideration estimates

are updated at each reporting period.

management services:

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The amount of variable consideration recognized

to date that remains subject to estimation is included within the contract asset on the consolidated balance sheet.

to date that remains subject to estimation is included within the contract asset in the consolidated balance sheets.

Consideration:

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Depreciation and amortization

Restructuring and impairment charges

Restructuring, impairment and unoccupied lease charges

Total operating expenses

Operating profit (loss)

Operating (loss) income

Interest expense - net

Other (expense) income - net

Other income (expense) - net

Loss before income taxes

Income tax provision (benefit)

Income tax provision

of 2020 and 2019

Net revenue of $64.4 million for the year ended December 31, 2019 increased

by $13.9 million or 27% from

revenue of $50.5 million for the year ended December 31, 2018.

Total revenue for the year ended December 31, 2019 included

$5.1 million and $29 million from the acquisitions of ETM and Orion, respectively offset by attrition from customers.

Total revenue

for the year ended December 31, 2018 included $17.8 million as a result of the Orion acquisition in July 2018.

($ in thousands)

Net revenue of $105.1 million for the year ended December 31, 2020 increased by $40.7 million or 63% from revenue

of $64.4 million for the year ended December 31, 2019.

Total revenue for the year ended December 31, 2020 included $53.3 million

from customers acquired in the CareCloud and Meridian acquisitions.

Revenue for the year ended December 31, 2020 includes $65.3

million relating to RCM and bundled services, $18.7 million related to SaaS services and $11.8 million for practice management

($ in thousands)

Direct operating costs

3 unchanged sentences

Change in contingent consideration

Resturcturing and impairment charges

Restructuring, impairment and unoccupied lease charges

Total operating expenses

Operating Costs.

Direct operating costs of $41.2 million for the year ended December

31, 2019 increased by $9.9 million or 32% from direct operating costs of $31.3 million

for the year ended December 31, 2018.

Salary costs increased by $4.8 million primarily

as a result of the Orion and ETM acquisitions.

Medical supplies increased by $2.7 million

as a result of the addition of the managed practices.

Direct operating costs of $64.8 million for the year ended December 31, 2020 increased by $23.6 million or

57% from direct operating costs of $41.2 million for the year ended December 31, 2019.

Salary costs increased by $12.2 million

primarily as a result of the CareCloud and Meridian acquisitions.

Outsourcing and other customer processing costs increased by

facility costs increased by $968,000 and postage and delivery costs increased by $299,000 .

$9.2 million, outside consultant costs increased by $873,000 and facility costs increased by $962,000.

and Marketing Expense.

Selling and marketing expense of $1.5 million for the year ended December 31, 2019 decreased by $90,000

or 6% from selling and marketing expense of $1.6 million for the year ended December 31,

Selling and marketing expense of $6.6 million for the year ended December 31, 2020 increased by $5.1

million or 332% from selling and marketing expense of $1.5 million for the year ended December 31, 2019.

The increase was primarily

related to additional emphasis on sales and marketing activities which accelerated as a result of the CareCloud acquisition.

and Administrative Expense.

General and administrative expense of $17.9

million for the year ended December 31, 2019 increased by $1.6 million or

10% from general and administrative expense of $16.3 million for the year ended December

Salary costs increased by $1.4 million as a result of the Orion and ETM acquisitions

and stock compensation expense.

General and administrative expense of $22.8 million for the year ended December 31, 2020 increased

by $4.9 million or 27% from general and administrative expense of $17.9 million for the year ended December 31, 2019.

increased by $2.3 million as a result of the CareCloud and Meridian acquisitions.

Computer expenses in subsidiaries increased

by $771,000 and legal and professional fees increased by $965,000.

and Development Expense.

Research and development expense of $871,000 for

the year ended December 31, 2019 decreased by $159,000 or 15% from

research and development expense of $1 million in the prior year.

Research and development expense of $9.3 million for the year ended December 31, 2020 increased by

$8.4 million or 969% from research and development expense of $871,000 in the prior year.

The increase primarily represented additional

salaries and outsourced development expense and cloud services related to new and enhanced product development, primarily on technologies

acquired as a result of the CareCloud and Meridian acquisitions.

Consideration.

The changes in contingent consideration of $(344,000) and $73,000 for the years ended December 31, 2019 and

2018, respectively, relate to changes in the fair value of the contingent consideration.

The losses in 2018 resulted primarily

from increases in the revenue estimates for acquisitions made in 2015 and 2016.

The gain in 2019 primarily represents a favorable

settlement related to previous acquisitions.

The changes in contingent consideration of ($1.0 million) and ($344,000) for the years ended December 31, 2020

and 2019, respectively, relate to changes in the fair value of the contingent consideration.

Depreciation.

Depreciation of $909,000 for the year ended December 31, 2019 increased b y $221,000

or 32% from depreciation of $688,000 for the year ended December 31, 2018, primarily as

a result of additional property and equipment purchases and the property and equipment obtained from the Orion and ETM acquisitions.

Amortizati on

Amortization expense of $2.1 million for

the year ended December 31, 2019, decreased by $69,000 or 3% from amortization expense of $2.2 million for the year ended

December 31, 2018.

This decrease is due to intangibles being amortized using the double declining method resulting in increased

amortization expense in the initial years.

Depreciation of $1.4 million for the year ended December 31, 2020 increased by $445,000 or 49% from depreciation of $909,000

for the year ended December 31, 2019, primarily as a result of additional property and equipment purchases and the property and

equipment obtained from the CareCloud and Meridian acquisitions.

Amortization expense of $8.6 million for the year ended December 31, 2020, increased by $6.5 million or 308% from

amortization expense of $2.1 million for the year ended December 31, 2019.

The increase was primarily related to the intangible

assets acquired from the CareCloud and Meridian acquisitions.

Restructuring,

and Impairment Charges.

Restructuring charges represent the remaining lease costs for a facility no longer used by the Company

as the employees were transferred to another Company facility.

Impairment charges represent charges recorded for a leased facility

no longer being used by the Company.

The Company is marketing the facility for sublease and recorded the difference between the

contractual rent obligation and the estimated sub lease payments as an impairment charge.

There were no similar costs incurred

Impairment and Unoccupied Lease Charges.

Restructuring charges represent the remaining lease costs for a facility no longer

used by the Company as the employees were transferred to another Company facility.

Impairment charges represent charges recorded

for a leased facility no longer being used by the Company.

Unoccupied lease charges represent the portion of lease and related

costs for space not being utilized by the Company.

The Company is marketing the unused facilities and unused space for sub-lease.

In February 2021, the Company was able to settle one lease obligation.

($ in thousands)

Interest income

Interest expense

Other (expense) income - net

Income tax provision (benefit)

Interest income of $262,000 for the year ended December 31, 2019 increased b y $161,000

or 160% from interest income of $101,000 for the year ended December 31, 2018.

income primarily represents interest earned on temporary cash investments and late fees from customers.

Interest expense of $383,000 for the

year ended December 31, 2019 increased by $32,000 or 9% from interest expense of $351,000

for the year ended December 31, 2018 primarily as a result of the adoption of ASC 842.

expense also includes the amortization of deferred financing costs which was approximately $192,000 during both the years ended

December 31, 2019 and 2018.

Other income (expense) - net

Income tax provision

Interest income of $42,000 for the year ended December 31, 2020 decreased by $220,000 or 84% from interest income

of $262,000 for the year ended December 31, 2019.

Interest income primarily represents interest earned on temporary cash investments

and late fees from customers.

Interest expense of $488,000 for the year ended December 31, 2020 increased by $105,000 or 27% from interest expense

of $383,000 for the year ended December 31, 2019.

Interest expense also includes the amortization of deferred financing costs

which was approximately $180,000 and $192,000 during the years ended December 31, 2020 and 2019, respectively.

Income (Expense) - net.

Other expense - net was $626,000 for the year ended December 31, 2019 compared to other income - net

Other income - net was $7,000 for the year ended December 31, 2020 compared to other expense - net

of $625,000 for the year ended December 31, 2019.

5 unchanged sentences

Tax Provision (Benefit).

There was a $193,000 provision

for income taxes for the year ended December 31, 2019, compared to the benefit for income taxes of $157,000 for the year ended

December 31, 2018.

Included in the tax provision for the year ended December 31, 2019 is an $80,000 deferred income tax provision.

current income tax provision for the year ended December 31, 2019 and 2018 was approximately $113,000 and $50,000, respectively

There was a $103,000 provision for income taxes for the year ended December 31, 2020, compared to

the provision for income taxes of $193,000 for the year ended December 31, 2019.

Included in the tax provision for the year ended

December 31, 2020 is an $84,000 deferred income tax benefit.

current income tax provision for the years ended December 31, 2020 and 2019 was approximately $187,000 and $113,000, respectively,

and primarily relates to state minimum taxes and foreign income taxes.

The pre-tax loss was $679,000

and $2.3 million for the years ended December 31, 2019 and 2018, respectively.

The Company has

incurred losses historically and there is uncertainty regarding future US taxable income, which make realization of a deferred

tax asset difficult to support in accordance with ASC 740.

Accordingly, a valuation allowance was recorded against all deferred

tax assets at December 31, 2019 and 2018.

The pre-tax loss was $8.7 million and $679,000 for the

years ended December 31, 2020 and 2019, respectively.

The Company has incurred losses historically and there is uncertainty regarding

taxable income, which make realization of a deferred tax asset difficult to support in accordance with ASC 740.

a valuation allowance was recorded against all deferred tax assets at December 31, 2020 and 2019.

Company has recorded goodwill as a result of its acquisitions.

Goodwill is not amortized for financial reporting purposes.

goodwill is tax deductible and amortized over 15 years for tax purposes.

As such, deferred income tax expense and a deferred tax

liability arise as a result of the tax-deductibility of this indefinitely lived asset.

The resulting deferred tax liability, which

is expected to continue to be recorded over the amortization period, will have an indefinite life.

As a result of the Company

incurring tax losses for 2019 and 2018 which have an indefinite life under the recent tax reform legislation, the federal deferred

tax liability resulting from the amortization of goodwill was offset against these indefinite federal operating net loss deferred

tax assets to the extent allowable.

The remaining deferred tax liability could remain on the Company’s consolidated balance

sheet indefinitely unless there is an impairment of goodwill (for financial reporting purposes) or a portion of the related business

Goodwill is generally not amortized for financial reporting purposes.

However, goodwill from asset acquisitions is tax deductible and amortized over 15 years for tax purposes.

As such, deferred income

tax expense and a deferred tax liability arise as a result of the tax-deductibility of this indefinitely lived asset.

The resulting

deferred tax liability, which is expected to continue to be recorded over the amortization period, will have an indefinite life.

As a result of the Company incurring tax losses for 2020 and 2019 which have an indefinite life under the recent tax reform legislation,

the federal deferred tax liability resulting from the amortization of goodwill was offset against these indefinite federal operating

net loss deferred tax assets to the extent allowable.

The remaining deferred tax liability could remain on the Company’s

consolidated balance sheet indefinitely unless there is an impairment of goodwill (for financial reporting purposes) or a portion

of the related business is sold.

Company will maintain a full valuation allowance on deferred tax assets until there is sufficient evidence to support the reversal

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benefit in the period of release.

Company has a federal NOL carry forward of approximately $19.8 million of which approximately $15.8 million will expire between

2034 and 2037 and the balance has an indefinite life.

The Company has state NOL carry forwards of approximately $38.5 million,

of which $17.9 million relates to the State of New Jersey.

These NOLs expire between 2034 to 2039.

of December 31, 2020, the Company has a total federal NOL carry forward of approximately $270.9 million of which approximately

$198.8 million will expire between 2029 and 2037, and the balance of approximately $72.1 million has an indefinite life.

Out of the total federal NOL carry forward, approximately $237.6 million is from the CareCloud and Meridian acquisitions and is

subject to the federal Section 382 NOL annual usage limitations.

The Company has state NOL carry forwards of approximately $161.0

million, of which $85.8 million relates to the State of New Jersey.

These NOLs expire between 2034 and 2040.

and Capital Resources

the year ended December 31, 2019, there was positive cash flow from operations of approximately

$7.6 million and at year-end the Company had

$19.8 million in cash, positive working capital of

$19.8 million and no bank debt.

During the three

months ended December 31, 2019, cash provided by operations was $2.9 million .

Company has a revolving line of credit with SVB, and, as of December 31, 2019, there was no balance outstanding.

the Company sold 1,020,000 shares of Preferred Stock and raised net proceeds of approximately $22.8 million.

the year ended December 31, 2019, the Company sold 373,000 shares of Preferred Stock and raised

$9.6 million in net proceeds after fees and expenses.

the year ended December 31, 2020, there was negative cash flow from operations of approximately $892,000 and at year-end the Company

had $20.9 million in cash and positive working capital of $15.8 million.

Cash used by operations in 2020 includes $10.3 million

used to pay outstanding obligations assumed with the acquisitions of CareCloud and Meridian, which were anticipated at the time

of acquisition and factored into the purchase prices.

During the three months ended December 31, 2020, cash provided by operations

was $3.4 million.

The Company has a revolving line of credit with SVB, and, as of December 31, 2020, there was no balance outstanding.

During 2019, the Company sold 373,000 shares of Preferred Stock and raised $9.6 million in net proceeds after fees and expenses.

During the year ended December 31, 2020, the Company sold 1,932,000 shares of Preferred Stock and raised $44.5 million in net

proceeds after fees and expenses.

following table summarizes our cash flows for the years presented.

Net cash provided by operating activities

Year ended December 31,

($ in thousands)

Net cash (used in) provided by operating activities

Net cash used in investing activities

(13,628,249 )

Net cash provided by financing activities

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Net increase in cash

loss before income taxes was $679,000 for

the year ended December 31, 2019, of which $3.0 million was non-cash depreciation and amortization.

The loss before income tax for the year ended December 31, 2018 was $2.3 million, of which $2.9 million was non-cash depreciation

loss before income taxes was $8.7 million for the year ended December 31, 2020, of which $9.9 million was non-cash depreciation

and amortization.

The loss before income taxes for the year ended December 31, 2019 was $679,000, of which $3.0 million was non-cash

depreciation and amortization.

continues to focus on the Company’s overall profitability, including growing revenue and managing expenses, and expects

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fixed rate contracts to our customers, as the prices that we charge are not governed by long-term contracts.

provided by operating activities wa s $7.6 million and

$6.8 million during the years ended December 31, 2019 and 2018, respectively.

The decrease in the net loss of $1.3 million

included the following changes in non-cash items:

in depreciation and amortization of $157,000 , increase in stock-based compensation of

$752,000, and an increase in interest accretion of $307,000 .

Revenue increased by $13.9

million for the year ended December 31, 2019 compared to the year ended December 31, 2018, and

expenses increased by $11.3 million for the same period primarily due to the acquisition

of ETM in second quarter of 2019 and Orion in the third quarter of 2018.

the second quarter of 2020, patient volumes decreased due to COVID-19, but returned to near normal levels during the third and

fourth quarters.

The Company did not have any significant employee terminations or furloughs as a result of COVID -19.

2021, the Company currently estimates that it will need to pay approximately $4.2 million to resolve a civil investigation which

one of the subsidiaries it acquired in 2020 has been subject to since July 2018.

Of this amount, $4.0 million will come from

escrowed shares of preferred stock that the Company holds.

used by operating activities was $892,000 and cash generated by operating activities was $7.6 million during the years ended December

31, 2020 and 2019, respectively.

The increase in the net loss of $7.9 million included the following changes in non-cash items:

increase in depreciation and amortization of $7.1 million, increase in stock-based compensation of $3.3 million, and an increase

in lease amortization of $1.0 million.

Revenue increased by $40.7 million for the year ended December 31, 2020 compared to the

year ended December 31, 2019, and operating expenses increased by $49.0 million for the same period primarily due to the acquisitions

of CareCloud and Meridian.

generated by the reduction of accounts receivable was $394,000 for the year ended December 31, 2020, compared with a reduction

of $1.5 million for the year ended December 31, 2018.

This excludes the acquired accounts receivable as part of the ETM and Orion

acquisitions.

Accounts payable, accrued compensation and accrued expenses increased by $1.4 million during the year ended

December 31, 2019, compared with a decrease o f $2.1 million for the year ended December

used in investing activities during the year ended December 31, 201 9 was $4.2 million,

a decrease of $9.5 million compared to $13.6 million during the year ended December

The change is due to the Company acquiring Orion for a cash consideration of $12.6 million during 2018, while in 2019

the Company paid $1.6 million for the acquisition of ETM.

provided by financing activities during the year ended December 31, 2019 was $1.4 million,

compared to $17.7 million in the year ended December 31, 2018.

There was also $1.4 million of payments to settle the tax withholding

Cash provided by financing activities during 2019 includes $9.6 million of net proceeds after fees and expenses from

issuing 373,030 shares of Preferred Stock, offset by $430,000

of repayments for debt obligations, and $6.1 million of Preferred Stock dividends.

Cash provided by financing activities during

2018 includes $22.8 million of net proceeds from issuing 1,020,000 shares of Preferred Stock, offset

by $464,000 of repayments for debt obligations, and $4.1 million of Preferred Stock

In 2018, there were $333,000 of payments to settle tax withholding obligations.

There were no borrowings under the

revolving line of credit for the year ended December 31, 2019 and no net borrowings for

the year ended December 31, 2018.

of $765,000 for the year ended December 31, 2019.

This excludes the acquired accounts receivable as part of the ETM, CareCloud

and Meridian acquisitions.

Accounts payable, accrued compensation and accrued expenses increased by $11.9 million during the year

ended December 31, 2020, compared with an increase of $1.4 million for the year ended December 31, 2019.

While the cash used to

pay pre-acquisition accounts payable, accrued compensation and accrued expenses was anticipated at the time of the CareCloud and

Meridian acquisitions, and was considered as part of the purchase prices of these transactions, it is shown as cash used by operations

to conform with GAAP.

used in investing activities during the year ended December 31, 2020 was $31.5 million, an increase of $27.3 million compared

to $4.2 million during the year ended December 31, 2019.

The change is due to the Company acquiring ETM for a cash consideration

of $1.6 million during 2019, while in 2020 the Company paid $23.7 million for the acquisitions of CareCloud and Meridian.

software was $5.2 million and $538,000 during the years ended December 31, 2020 and 2019, respectively.

provided by financing activities during the year ended December 31, 2020 was $33.4 million, compared to $1.4 million for the year

ended December 31, 2019.

Cash provided by financing activities during 2020 includes $44.5 million of net proceeds after fees and

expenses from issuing 1,932,000 shares of Preferred Stock, offset by $666,000 of repayments for debt obligations, and $11.4 million

of Preferred Stock dividends.

Cash provided by financing activities during 2019 includes $9.6 million of net proceeds from issuing

373,000 shares of Preferred Stock, offset by $430,000 of repayments for debt obligations, and $6.1 million of Preferred Stock

There was also $2.2 million of payments to settle the tax withholding obligations in 2020 compared to $1.4 million

There were no borrowings under the revolving line of credit as of December 31, 2020 and 2019.

Obligations and Commitments

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We also maintain operating leases for property and certain office equipment.

We were in compliance with all SVB covenants in 2019, except for one instance where a waiver was obtained in conjunction with

the acquisition of ETM.

following table presents certain payments due by the Company under our long-term contractual obligations with minimum firm commitments

as of December 31, 2019.

In addition, based on the interest-bearing obligations as of December 31, 2019, we expect interest expense

to be approximately $11,000 during the years below.

This excludes the amortization of bank financing costs which is recorded as

interest expense.

Year Ending December 31,

Notes payable

We were in compliance with all SVB covenants in 2020.

Sheet Arrangements

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of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Other than our operating leases

for office space, computer equipment and other property, we do not engage in off-balance sheet financing arrangements.

During the first quarter of

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 December 31, 2020, talkMD had not

yet commenced operations or had any transactions or agreements with the Company or otherwise.

We do not engage in off-balance

sheet financing arrangements.

Quantitative and Qualitative Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity