What changed in this filing

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Item 9A. Controls and Procedures

2021-02-25 compared with 2020-02-28 · 979 added, 826 removed, 992 unchanged (65% of the section changed)

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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, including its principal executive and principal financial officers, 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

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management has performed its assessment according to the guidelines established by COSO.

Based on the assessment, management has

concluded that our system of internal control over financial reporting, as of December 31, 2019, is effective.

of its inherent limitations, our internal controls over financial reporting provide reasonable, not absolute, assurance that the

financial statements and footnotes thereto are free of material error.

In addition, no internal control structure can provide

absolute assurance that all instances of fraud have been detected.

Also, projections of any evaluation of effectiveness to future

periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance

with the policies and procedures may deteriorate.

Management excluded Meridian from its

assessment of internal controls over financial reporting, the most recent acquisition, as it was not possible to conduct an assessment

of the acquired business’s internal control over financial reporting in the period between the commencement date and the

date of management’s assessment.

During 2020, the revenue recorded by the Company for Meridian was approximately $21.5 million.

Based on the assessment, management has concluded that our system of internal control over financial reporting, as of December

31, 2020, is effective.

of its inherent limitations, our internal controls over financial

reporting provide reasonable, not absolute, assurance that the financial statements and footnotes thereto are free of material

In addition, no internal control structure can provide absolute assurance that all instances of fraud have been detected.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate

because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal

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over financial reporting.

Other Information

On February 28, 2020, the Company and its

wholly owned subsidiaries MTBC Acquisition Corp., MTBC Health, Inc., MTBC Practice Management Corp., MTBC-Med, Inc., and CareCloud

Corporation entered into a Joinder and Third Loan Modification Agreement (the “Joinder Agreement”) with SVB, whereby

CareCloud and MTBC-Med became parties to the Company’s credit agreement with SVB.

The foregoing description of the Joinder

Agreement does not purport to be complete and is qualified entirely by reference to the complete text of such document, a copy

of which is attached as an exhibit to this Form 10-K and is incorporated herein by reference.

The above description has been included

to provide investors and security holders with information regarding the terms thereof.

Investors and security holders are not

third-party beneficiaries under the credit agreement and should not rely on the representations, warranties and covenants or any

descriptions thereof as characterizations of the actual state of facts or condition thereto or any of their respective subsidiaries

or affiliates.

Moreover, information concerning the subject matter of representations and warranties may change after the date

of the loan agreement, which subsequent information may or may not be fully reflected in the Company’s disclosures.”

Directors, Executive Officers and Corporate Governance

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required by this item will be included in the 2021 Proxy Statement and is incorporated herein by reference.

Principal Accounting Fees and Services

Principal Accountant Fees and Services

required by this item will be included in our 2021 Proxy Statement and is incorporated herein by reference.

Exhibits, Financial Statement Schedules

Exhibits and Financial Statement Schedules

following documents are filed as part of this Annual Report on Form 10-K:

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(filed as Exhibit 2.29 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference).

Agreement and Plan of Merger by and among MTBC, Inc., MTBC Merger Sub, Inc., CareCloud Corporation and Runway Growth Credit Fund Inc., as the Sellers’

Representative dated January 8, 2020 (filed as Exhibit 2.1 to the Company’s Form 8-K filed on January 8, 2020, and incorporated herein by reference).

Asset Purchase Agreement dated March 27, 2019, by and between MTBC-Med, Inc., and Etransmedia Technology, Inc., et.

(filed as Exhibit 10.1 to the Company’s Form 8-K filed on March 28, 2019, and incorporated herein by reference).

Amended and Restated Asset Purchase Agreement dated April 3, 2019, by and between MTBC-Med, Inc., and Etransmedia Technology, Inc., et.

(filed as Exhibit 10.1 to the Company’s Form 8-K filed on April 4, 2019, and incorporated herein by reference).

Agreement and Plan of Merger by and among MTBC, Inc., MTBC Merger Sub, Inc., CareCloud Corporation and Runway Growth Credit Fund Inc., as the Seller’s representative dated January 8, 2020 (filed as Exhibit 2.1 to the Company’s Form 8-K filed on January 8, 2020, and incorporated herein by reference).

Escrow Agreement dated January 8, 2020 by and among MTBC, Inc., Runway Growth Credit Fund., Inc.

and TD Bank (filed as Exhibit 10.17 to the Company’s Form 10-K filed on February 28, 2020, and incorporated herein by reference).

Stock Purchase Agreement dated June 16, 2020 by and among MTBC, Inc., Origin Holdings, Inc., Meridian Billing Management Co., Origin Holdings, Inc., and GMM II Holdings, LLC, (filed as Exhibit 2.1 to the Company’s Form 8-K on June 17, 2020, and incorporated herein by reference).

Amended and Restated Certificate of Incorporation of the Company dated April 4, 2014 (filed as Exhibit 3.1 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference).

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Third Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated September 25, 2018 (filed as Exhibit 3.7 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference).

Fourth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock (filed as Exhibit 3.1 to the Company’s Form 8-K filed on January 25, 2020 and incorporated herein by reference).

Fourth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated January 9, 2020 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on January 28, 2020, and incorporated herein by reference).

Fifth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated May 19, 2020 (filed as Exhibit 3.2 to the Company’s Form 8-K filed on May 21, 2020, and incorporated herein by reference).

Sixth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated July 9, 2020 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on July 9, 2020, and incorporated herein by reference).

Amended and Restated By-laws of the Company (filed as Exhibit 3.2 to the Company’s Amendment No.

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Warrant to Purchase Stock issued by the Company on January 8, 2020 to Runway Growth Credit Fund Inc.

(filed as Exhibit 4.5 to the Company’s Form 10-K filed on February 28, 2020, and incorporated herein by reference).

Warrant to Purchase Stock issued by the Company on January 8, 2020 to Runway Growth Credit Fund Inc.

(filed as Exhibit 4.6 to the Company’s Form 10-K filed on February 28, 2020, and incorporated herein by reference).

Form of Warrant to Purchase Stock issued by the Company on June 16, 2020 with respect to the Meridian transaction (filed as Exhibit 4.7 to the Company’s Form S-1 filed on August 20, 2020, and incorporated herein by reference).

Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.

Form of Indemnification Agreement between the Company and each of its directors and executive officers (filed as Exhibit 10.1 to Amendment No.

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First Amendment to the Amended and Restated Equity Incentive Plan of the Company (filed as Exhibit 10.16 to the Company’s Form 10-Q filed on August 8, 2018, and incorporated herein by reference).

Second Amendment to MTBC, Inc.

Amended and Restated Equity Incentive Plan (filed as Exhibit 3.1 to the Company’s Form 8-K filed on May 21, 2020, and incorporated herein by reference).

Form of Restricted Stock Unit Agreement under Amended and Restated Equity Incentive Plan (filed as Exhibit 10.3 to Amendment No.

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and Silicon Valley Bank (filed as Exhibit 10.1 to the Company’s Form 8-K filed on October 16, 2017, and incorporated herein by reference).

Joinder and First Loan Modification Agreement dated as of September 20, 2018 between Medical Transcription Billing, Corp., MTBC Acquisition, Corp., MTBC Health, Inc.

J oinder and First Loan Modification Agreement dated as of September 20, 2018 between Medical Transcription Billing, Corp., MTBC Acquisition, Corp., MTBC Health, Inc.

and MTBC Practice Management, Corp.

and Silicon Valley Bank (filed as Exhibit 10.1 to the Company’s Form 8-K filed on September 20, 2018, and incorporated herein by reference).

Second Loan Modification Agreement dated November 15, 2019, by and between the Company and SVB (filed as Exhibit 1.1 to the Company’s Form 8-K filed on November 21, 2019, and incorporated herein by reference).

Joinder and Third Loan Modification Agreement dated as of February 28, 2020 between MTBC, Inc., MTBC Acquisition Corp., MTBC Health, Inc.

and MTBC Practice Management Corp., MTBC-Med, Inc., CareCloud Corporation and Silicon Valley Bank (filed as Exhibit 10.16 to the Company’s Form 10-K filed on February 28, 2020, and incorporated herein by reference).

Joinder and Fourth Loan Modification Agreement dated September 21, 2020, by and between the Company and SVB (filed as Exhibit 1.1 to the Company’s Form 8-K filed on September 25, 2020, and incorporated herein by reference).

Asset Purchase Agreement dated March 27, 2019, by and between MTBC-Med, Inc., and Etransmedia Technology, Inc., et.

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(filed as Exhibit 10.1 to the Company’s Form 8-K filed on April 4, 2019, and incorporated herein by reference).

Joinder and Third Loan Modification Agreement dated as of February 28, 2020 between MTBC, Inc., MTBC Acquisition Corp., MTBC Health, Inc.

and MTBC Practice Management Corp., MTBC-Med, Inc., CareCloud Corporation and Silicon Valley Bank.

Escrow Agreement dated January 8, 2020 by and among MTBC, Inc., Runway Growth Credit Fund Inc., and TD Bank

Underwriting Agreement dated July 16, 2020 by and between the Company and B.

Riley FBR, Inc.

as representative of several underwriters names therein (filed as Exhibit 1.1 to the Company’s Form 8-K filed on July 17, 2020, and incorporated herein by reference).

List of subsidiaries.

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Taxonomy Extension Definition Linkbase

Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Indicates management contract or compensatory plan or arrangement.

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Hadi Chaudhry

Lawrence Sharnak

Cameron Munter

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the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are

required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

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to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

Our audits included performing procedures to assess the risks of material misstatement of the financial statements,

whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a

test basis, evidence supporting the amounts and disclosures in the financial statements.

Our audits also included evaluating the

accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the

financial statements.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting

but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was

communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by

communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or

disclosures to which it relates.

of certain Intangible Assets associated with the acquisitions of Meridian Billing Management Co.

and CareCloud Corporation

described further in Note 3 to the consolidated financial statements, the Company completed the acquisitions of Meridian Billing

Management Co.

and CareCloud Corporation (collectively, the “Acquisitions”) during the year ended December 31, 2020.

These transactions were accounted for as business combinations in accordance with Accounting Standards Codification (“ASC”)

805, Business Combinations, which resulted in the identification and recognition of certain intangible assets.

assets consisted primarily of customer relationships and technology (collectively, “the identifiable intangible assets”).

The Company used a discounted cash flow model to measure the customer relationship intangible assets and a relief from royalty

model to measure the technology acquired.

We identified valuation of identifiable intangible assets associated with these acquisitions

as a critical audit matter.

principal considerations for our determination that the valuation of the identifiable intangible assets is a critical audit matter

is the complexity and high degree of subjectivity associated with auditing the Company’s fair value of identifiable intangible

The significant assumptions used to estimate the fair value of the identifiable intangible assets include certain assumptions

that form the basis of the future net cash flows, such as assumed growth rates, discount rate, economic lives, royalty

rates and customer attrition.

These significant assumptions are forward looking and consider anticipated market conditions, which,

in turn, requires subjective auditor judgement.

audit procedures related to the valuation of intangible assets included the following, among others:

tested the significant assumptions used within the discounted cash flow model to estimate the fair value of the identifiable

intangible assets which included certain assumptions such as assumed growth rates and economic lives as compared to historical

involved valuation professionals with specialized skills and knowledge who assisted in evaluating the appropriateness of the

selected valuation methodology for the identifiable intangible assets and evaluating the reasonableness of certain significant

assumptions used, including discount rates, economic lives, royalty rates, and customer attrition.

evaluated whether assumptions used were reasonable by considering past performance of similar assets, market data, current

market forecasts, and whether such assumptions were consistent with evidence obtained in other areas of the audit.

GRANT THORNTON LLP

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OF DECEMBER 31, 2020 AND 2019

December 31, 2019

December 31, 2018

in thousands, except share and per share amounts)

CURRENT ASSETS:

Accounts receivable - net of allowance for doubtful accounts of $256,000 and $189,000 at December 31, 2019 and December 31, 2018, respectively

Accounts receivable, net

Contract asset

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Accrued expenses

Deferred rent (current portion)

Operating lease liability (current portion)

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Accrued liability to related party

Deferred payroll taxes

Notes payable (current portion)

Contingent consideration

Dividend payable

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Notes payable

Deferred rent

Deferred payroll taxes

Operating lease liability

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SHAREHOLDERS’

Preferred stock, $0.001 par value - authorized 7,000,000 and 4,000,000 shares at December 31, 2019 and December 31, 2018, respectively;

Preferred stock, $0.001 par value - authorized 7,000,000 shares at December 31, 2020 and December 31, 2019;

issued and outstanding 5,475,279 and 2,539,325 shares at December 31, 2020 and December 31, 2019, respectively

Common stock, $0.001 par value - authorized 29,000,000 and 19,000,000 shares at December 31, 2019 and December 31, 2018, respectively;

Common stock, $0.001 par value - authorized 29,000,000 shares at December 31, 2020 and December 31, 2019;

issued 14,121,044 and 12,978,485 shares at December 31, 2020 and December 31, 2019, respectively;

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Accumulated deficit

(25,075,545 )

(24,203,745 )

Accumulated other comprehensive loss

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THE YEARS ENDED DECEMBER 31, 2020 AND 2019

in thousands, except share and per share amounts)

OPERATING EXPENSES:

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Depreciation and amortization

Restructuring and impairment charges

Restructuring, impairment and unoccupied lease charges

Total operating expenses

OPERATING INCOME (LOSS)

OPERATING (LOSS) INCOME

Interest income

Interest expense

Other (expense) income - net

Other income (expense) - net

LOSS BEFORE PROVISION FOR INCOME TAXES

Income tax provision (benefit)

$ (2,138,480 )

Income tax provision

Preferred stock dividend

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

$ (7,257,954 )

$ (6,962,467 )

Net loss per common share:

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THE YEARS ENDED DECEMBER 31, 2020 AND 2019

$ (2,138,480 )

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX

in thousands)

OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX

Foreign currency translation adjustment (a)

COMPREHENSIVE LOSS

$ (2,838,478 )

No tax effect has been recorded as the Company recorded a valuation allowance against the tax benefit from its foreign currency

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THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Other Comprehensive

in thousands, except for number of shares)

Shareholders’

- December 31, 2017 before adoption of ASC 606

$ (23,509,386 )

effect of adopting ASC 606

- January 1, 2018 after adoption

$ (22,065,265 )

currency translation adjustment

of stock under the equity incentive plan

stock warrants issued

compensation, net of cash settlements

withholding obligations on stock issued to employees

of preferred stock, net of fees and expenses

Comprehensive

Balance - January 1, 2019

Foreign currency translation

Issuance of stock under

the equity incentive plan

Issuance of preferred

stock, net of fees and expenses

Stock-based compensation,

net of cash settlements

Tax withholding obligations

on stock issued to employees

stock dividends

- December 31, 2018

$ (24,203,745 )

$ (1,421,068 )

- January 1, 2019

$ (24,203,745 )

$ (1,421,068 )

currency translation adjustment

of stock under the equity incentive plan

of preferred stock, net of fees and expenses

compensation, net of cash settlements

withholding obligations on stock issued to employees

Balance - December

Balance - January 1, 2020

Foreign currency translation

Issuance of stock under

the equity incentive plan

Issuance of preferred

stock, net of fees and expenses

Issuance of preferred

stock in connection with the CareCloud and Meridian acquisitions

Issuance of warrants

in connection with the CareCloud and Meridian acquisitions

Exercise of common stock warrants

Stock-based compensation,

net of cash settlements

stock dividends

- December 31, 2019

$ (25,075,545 )

all periods presented, the preferred stock dividends were paid monthly at the rate of $2.75 per share per annum.

Balance - December

all years presented, the preferred stock dividends were paid monthly at the rate of $2.75 per share per annum.

notes to consolidated financial statements.

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THE YEARS ENDED DECEMBER 31, 2020 AND 2019

in thousands)

OPERATING ACTIVITIES:

$ (2,138,480 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

Deferred rent

Lease amortization

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Provision for doubtful accounts

Provision (benefit) for deferred income taxes

Foreign exchange loss (gain)

(Benefit) provision for deferred income taxes

Foreign exchange (gain) loss

Interest accretion

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Accounts payable and other liabilities

Net cash provided by operating activities

Net cash (used in) provided by operating activities

INVESTING ACTIVITIES:

Capital expenditures and capitalized software, net

Cash paid for acquisitions

(12,600,000 )

Purchase of property and equipment

Capitalized software

Cash paid for acquisitions (net)

Net cash used in investing activities

(13,628,249 )

FINANCING ACTIVITIES:

Proceeds from issuance of preferred stock, net of fees and expenses

Preferred stock dividends paid

Settlement of tax withholding obligations on stock issued to employees

Proceeds from line of credit

Repayments of line of credit

(11,276,862 )

Repayments of notes payable, net

Contingent consideration payments

Proceeds from exercise of warrants

Net proceeds from issuance of preferred stock

Proceeds from line of credit

Repayments of line of credit

Settlement of contingent obligation

Other financing activities

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CASH - end of the period

SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:

SUPPLEMENTAL NONCASH OPERATING, INVESTING AND FINANCING ACTIVITIES:

Preferred stock issued in connection with CareCloud and Meridian acquisitions

Vehicle financing obtained

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Warrants issued

SUPPLEMENTAL INFORMATION - Cash paid during the period for:

Escrow recorded as indemnification asset and offsetting accrual

SUPPLEMENTAL INFORMATION - Cash paid during the year for:

notes to consolidated financial statements.

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OF AND FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

Inc., (and together with its subsidiaries “MTBC”

or the “Company”) is a healthcare information technology

company that offers an integrated suite of proprietary cloud-based electronic health records and practice management solutions,

together with related business services, to healthcare providers.

The Company’s integrated services are designed to help

customers increase revenues, streamline workflows and make better business and clinical decisions, while reducing administrative

burdens and operating costs.

The Company’s services include full-scale revenue cycle management, comprehensive practice

management services, electronic health records, and other technology-driven practice management services for private and hospital-employed

healthcare providers.

MTBC has its corporate offices in Somerset, New Jersey and maintains client support teams throughout the

U.S., in Pakistan and in Sri Lanka.

Organization and Business

MTBC, Inc., (“MTBC”

and together with its consolidated subsidiaries, the “Company”, “we”, “us”

and/or “our”) is a healthcare information technology company that offers an integrated suite of proprietary cloud-based electronic

health records and practice management solutions, together with related business services, to healthcare providers.

The Company’s

integrated services are designed to help customers increase revenues, streamline workflows and make better business and clinical decisions,

while reducing administrative burdens and operating costs.

The Company’s services include full-scale revenue cycle management, comprehensive

practice management services, electronic health records, patient experience management solutions and other technology-driven practice

management services for private and hospital-employed healthcare providers.

MTBC has its corporate offices in Somerset, New Jersey and

maintains client support teams throughout the U.S., in our Pakistan Offices and in Sri Lanka.

was founded in 1999 and incorporated under the laws of the State of Delaware in 2001.

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Millennium Practice Management Associates, LLC (together “MediGain”).

MAC has a wholly owned subsidiary in

Sri Lanka, RCM MediGain Colombo, Pvt.

MAC has a wholly owned subsidiary in Sri Lanka,

RCM MediGain Colombo, Pvt.

In May 2018, MTBC formed MTBC Health, Inc.

(“MHI”) and MTBC Practice Management,

(“MPM”), each a Delaware corporation in connection MTBC’s acquisition of substantially all of the revenue

cycle management, practice management and group purchasing organization assets of Orion Healthcorp, Inc.

and 13 of its affiliates

(together, “Orion”).

MHI is a direct, wholly owned subsidiary of MTBC, and was formed to own and operate the revenue

cycle management and group purchasing organization businesses acquired from Orion.

MPM is a wholly owned subsidiary of MHI and

was formed to own and operate the practice management business acquired from Orion.

Company’s previous subsidiary in Poland was liquated in 2018.

The operations in the Indian subsidiary have been terminated

and the subsidiary is being liquidated.

April 2019, MTBC formed MTBC-Med, Inc.

(“MED”), a Delaware corporation in connection with MTBC’s acquisition

of substantially all of the revenue cycle management assets of Etransmedia Technology, Inc.

(“ETM”).

(See Note 3).

Accounting Policies

(“MHI”) and MTBC Practice Management, Corp.

(“MPM”), each a Delaware corporation in connection MTBC’s acquisition of substantially all of the revenue cycle

management, practice management and group purchasing organization assets of Orion Healthcorp, Inc.

and 13 of its affiliates (together,

“Orion”).

MHI is a direct, wholly owned subsidiary of MTBC, and was formed to own and operate the revenue cycle management

and group purchasing organization businesses acquired from Orion.

MPM is a wholly owned subsidiary of MHI and was formed to own

and operate the practice management business acquired from Orion.

March 2019, MTBC formed MTBC-Med, Inc.

(“MED”), a Delaware corporation, in connection with its acquisition of substantially

all of the assets of Etransmedia Technology, Inc.

and its subsidiaries (“Etransmedia”).

In January 2020, MTBC purchased

CareCloud Corporation (“CareCloud”).

In June 2020, MTBC purchased Meridian Billing Management Co.

(“MBM”)

and its affiliate Origin Holdings, Inc.

(collectively “Meridian”

and sometimes referred to as “Meridian Medical

Management”).

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.

Significant Accounting Policies

of Consolidation —

The accompanying consolidated financial statements have been prepared in accordance with accounting

principles generally accepted in the United States of America (“GAAP”) and include the accounts of MTBC, its wholly-owned

subsidiaries;

MAC (since October 3, 2016), MHI (since May 2018), MPM (since May 2018), MED (since April 1, 2019) its majority-owned

subsidiary MTBC Pvt.

Ltd, MTBC-MED (since April 2019) and since October 3, 2016, the operating results and financial condition

of the acquired subsidiary in Sri Lanka.

principles generally accepted in the United States of America (“GAAP”) and include the operating results and financial

condition of MTBC, its wholly-owned subsidiaries;

MAC, MHI, MPM, MED (since April 1, 2019), its majority-owned subsidiary MTBC

Ltd, MED (since April 2019), CareCloud (since January 2020), Meridian Medical Management (since June 2020) and the subsidiary

in Sri Lanka.

The non-controlling interest of MTBC Pvt.

is inconsequential to the consolidated

financial statements.

All intercompany accounts and transactions have been eliminated in consolidation.

is inconsequential to the consolidated financial statements.

intercompany accounts and transactions have been eliminated in consolidation.

Reporting —

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Recognition —

On January 1, 2018, the Company adopted Accounting Standards Codification, “

Revenue from Contracts

with Customers ,”

(“ASC 606”) using the modified retrospective method as applied to certain medical billing

services that were in process as of January 1, 2018.

As a result, financial information for reporting periods beginning on or

after January 1, 2018, are presented in accordance with ASC 606.

Comparative financial information for reporting periods beginning

prior to January 1, 2018, have not been adjusted and continue to be reported in accordance with the Company’s revenue recognition

policies prior to the adoption of ASC 606.

The Company recorded a cumulative adjustment related to the adoption of ASC 606.

primary impact of adopting ASC 606 was to accelerate the timing of revenue on certain medical billing services provided to customers.

Beginning January 1, 2018, revenue is recognized as the performance obligations are satisfied over time.

derive revenue from seven primary sources:

(1) revenue cycle management services, (2) professional services, (3) ancillary services,

(4) group purchasing services, (5) printing and mailing services, (6) clearinghouse and EDI (electronic data interchange) services

and (7) practice management services.

All of our revenue arrangements are based on contracts with customers.

Most of our contracts

with customers contain single performance obligations, although certain contracts do contain multiple performance obligations

where we perform more than one service for the same customer.

We account for individual performance obligations separately if

they are distinct within the context of the contract.

For contracts where we provide multiple services such as where we perform

multiple ancillary services, each service represents its own performance obligation.

Selling or transaction prices are based on

the contractual price for the service.

We derive revenue from eight primary sources:

(1) revenue cycle management services, (2) SaaS solutions,

(3) professional services, (4) ancillary services, (5) group purchasing services, (6) printing and mailing services, (7) clearinghouse

and EDI (electronic data interchange) services and (8) practice management services.

All of our revenue arrangements are based

on contracts with customers.

Most of our contracts with customers contain single performance obligations, although certain contracts

do contain multiple performance obligations where we perform more than one service for the same customer.

We account for individual

performance obligations separately if they are distinct within the context of the contract.

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.

five-step approach is applied in the recognition of revenue under ASC 606:

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expenses and are expensed as incurred.

The Company incurred approximately $810,000 and $950,000 of advertising costs for the years

ended December 31, 2019 and 2018, respectively.

The Company incurred approximately $2.1 million and $810,000 of advertising costs for the

years ended December 31, 2020 and 2019, respectively.

and Development Expenses —

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specific upgrades and enhancements when it is probable that the expenditures will result in additional functionality.

costs are recorded as part of intangible assets.

Maintenance and training costs are expensed as incurred.

Internal use software

is amortized on a straight line basis over its estimated useful life, generally three years.

Management evaluates the useful lives

of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact

the recoverability of these assets.

During the years ended December 31, 2019 and 2018, the Company capitalized approximately

$538,000 and $62,000, respectively, of salaries and payroll-related costs of employees and consultants who devoted time

to the development of customer related projects.

costs are recorded as part of intangible assets in the accompanying consolidated balance sheets.

Maintenance and training costs

are expensed as incurred.

Internal use software is amortized on a straight line basis over its estimated useful life, generally

Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events

or changes in circumstances occur that could impact the recoverability of these assets.

During the years ended December 31, 2020

and 2019, the Company capitalized approximately $5.2 million and $538,000, respectively, of salaries and payroll-related costs

of employees and consultants who devoted time to the development of customer related projects.

Receivable —

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movement in the allowance for doubtful accounts for the years ended December 31, 2020 and 2019 was as follows:

December 31, 2019

December 31, 2018

Year ended December 31,

($ in thousands)

Beginning balance

Ending balance

Inventory is stated at the lower of cost or market using the first-in, first out method of inventory valuation accounting.

Inventory consists of vaccines used at the managed practices and only includes the cost of the vaccines themselves.

and Equipment —

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31, 2020 and 2019, other than the impairment recorded on one right-of-use (“ROU”) asset of approximately $298,000

for the year ended December 31, 2019.

and $170,000 for the year ended December 31, 2020 and 2019, respectively.

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses

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assets acquired in a business combination must be recognized and reported apart from goodwill.

Goodwill represents the excess

purchase price over the fair value of the tangible net assets and intangible assets acquired in a business combination.

Acquisition-related

expenses are recognized separately from the business combinations and are expensed as incurred.

Goodwill represents the excess purchase price over the fair value of the tangible net assets and intangible

assets acquired in a business combination.

Acquisition-related expenses are recognized separately from the business combinations

and are expensed as incurred.

If the business combination provides

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During the years ended December 31, 2020 and 2019, the Company incurred approximately $275,000

and $245,000 of professional fees related to the acquisitions discussed in Note 3, which are included in general and administrative

expenses in the consolidated statements of operations.

Acquisition costs for the CareCloud acquisition discussed in Note 20 were

approximately $129,000 for the year ended December 31, 2019 and are included in general and administrative expenses.

and $125,000, respectively, of professional fees related to the acquisitions discussed in Note 3, which are included in general

and administrative expenses in the consolidated statements of operations.

Taxes —

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positions are recognized in income tax expense.

the years ended December 31, 2019 and 2018, the Company did not recognize any penalties or interest related to unrecognized tax

benefits in its consolidated financial statements.

For the years ended December 31, 2020 and 2019, the Company did not recognize

any penalties or interest related to unrecognized tax benefits in its consolidated financial statements.

Dividends are recorded when declared by the Company’s Board of Directors.

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from paying dividends on its common stock without the prior written consent of its lender, Silicon Valley Bank (“SVB”).

Deferred rent at December 31, 2018, consisted of rent escalation payment terms related to the Company’s

operating leases for its facilities.

Deferred rent represented the difference between actual operating lease payments due and

straight-line rent expense, which is recorded by the Company over the term of the lease, including any construction period.

excess of the difference between actual operating lease payments due and straight-line rent expense is recorded as a deferred

credit in the early periods of the lease when cash payments are generally lower than straight-line rent expense, and is reduced

in the later periods of the lease when payments begin to exceed the straight-line expense.

As a result of the Company’s

adoption of ASC 842 as of January 1, 2019, deferred rent is no longer recorded on the consolidated balance sheet.

Revenue —

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as a component of other income –

net in the consolidated statements of operations and amounted to a loss of approximately

$827,000 and a gain of approximately $435,000 for the years ended December 31, 2019 and 2018, respectively.

Offering Costs —

Common and Preferred Stock offering costs consist principally of professional fees, primarily legal

and accounting, and other costs such as printing and registration costs incurred in connection with the issuance of the common

stock and the Preferred Stock in 2019 and 2018.

In connection with the 2019 and 2018 equity offerings, the Company incurred approximately

$110,000 and $282,000, respectively, of such costs, excluding underwriting commissions and placement agent fees.

net in the consolidated statements of operations and amounted to a gain of approximately

$14,000 and a loss of approximately $827,000 for the years ended December 31, 2020 and 2019, respectively.

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.

Acquisition Costs —

Costs incurred in connection with the acquisition of bank financing are deferred and amortized over

the estimated term of the related financing.

Such amortization is included in interest expense.

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.

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 consolidated financial position, results of operations and cash flows.

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

consolidated financial position, results of operations and cash flows.

June 2016, the FASB issued ASU 2016-13, Financial Instruments –

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federal corporate income tax rate in the Tax Cuts and Jobs Act is recorded.

guidance is effective for fiscal years beginning after December 15, 2018, and interim periods therein.

There was no impact on

the consolidated financial statements as a result of this standard.

Company adopted this guidance effective January 1, 2019.

There was no impact on the consolidated financial statements as a result

of this standard.

June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting .

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condition will be satisfied when an award contains such condition.

The guidance is effective for public business entities for

fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.

There was no impact on the

consolidated financial statements as a result of this standard.

The Company adopted this guidance effective January 1, 2019.

There was no impact on the consolidated financial statements as a result of this standard.

December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes .

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consolidated financial statements.

August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).

This ASU simplifies the accounting for certain

financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s

The amendments are not required to be implemented until 2022 for public entities.

The Company is in the process of

investigating if this update will have a significant impact on the consolidated financial statements.

June 16, 2020, MTBC entered into a Stock Purchase Agreement with Meridian Billing Management Co., a Vermont corporation, Origin

Holdings, Inc., a Delaware corporation and GMM II Holdings, LLC, a Delaware limited liability company (“Seller”),

pursuant to which MTBC purchased all of the issued and outstanding capital stock of Meridian from the Seller.

Meridian is in the

business of providing medical billing, revenue cycle management, electronic medical records, medical coding and related services.

These revenues have been included in the Company’s Healthcare IT segment.

The acquisition has been accounted for as a business

total consideration paid at closing was $11.9 million, net of cash received, 200,000 shares of the Company’s Preferred Stock

plus warrants to purchase 2,250,000 shares of the Company’s common stock, with an exercise price per share of $7.50 and

a term of two years.

The Company also assumed Meridian’s negative net working capital and certain long-term lease liabilities

where the leased space is either not being utilized or was to be vacated shortly, with an aggregate value of approximately $4.8

summary of the total consideration is as follows:

Meridian Purchase Price

($ in thousands)

Preferred stock

Total purchase price

the Preferred Stock consideration, 100,000 shares were held in escrow for up to one month pending completion of technical migration

and customer acceptance.

The shares held in escrow were released on August 3, 2020.

Company’s Preferred Stock and warrants issued as part of the acquisition consideration were issued in a transaction exempt

from registration under the Securities Act of 1933, as amended (the “Securities Act”).

The warrants were valued using

the Black-Scholes method.

The Company registered for resale under the Securities Act the Preferred Stock and the common stock

underlying the warrants.

During 2020, 593,349 warrants were exercised at $7.50 each.

Meridian acquisition added additional clients to the Company’s customer base, along with additional technology, most notably

a widely used business intelligence solution and robotic process automation.

Similar to previous acquisitions, Meridian broadened

the Company’s presence in the healthcare information technology industry through expansion of its customer base, both geographically

and to an increasing number of larger health systems, and by increasing available customer relationship resources and specialized

trained staff.

Company engaged a third-party valuation specialist to assist the Company in valuing the assets acquired and liabilities assumed

from Meridian.

The following table summarizes the preliminary purchase price allocation.

The Company expects to finalize the purchase

price allocation during the first or second quarter of 2021 and is finalizing the projections and the valuation of the acquired

assets and assumed liabilities.

The preliminary purchase price allocation for Meridian is summarized as follows:

($ in thousands)

Accounts receivable

Prepaid expenses

Contract asset

Property and equipment

Operating lease right-of-use assets

Customer relationships

Accounts payable

Accrued expenses & compensation

Deferred revenue

Operating lease liabilities

Other current liabilities

Total preliminary purchase price allocation

acquired accounts receivable are recorded at fair value which represents amounts that have subsequently been paid or are expected

to be paid by clients.

The fair value of customer relationships was based on the estimated discounted cash flows generated by

these intangibles.

The goodwill from this acquisition is not deductible for income tax purposes and represents the Company’s

ability to have an expanded local presence in additional markets and operational synergies that we expect to achieve that would

not be available to other market participants.

weighted-average amortization period of the acquired intangible assets is approximately three years.

earned from the clients obtained from the Meridian acquisition was approximately $21.5 million for the year ended December 31,

January 8, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CareCloud

Corporation, a Delaware corporation (“CareCloud”), MTBC Merger Sub, Inc., a Delaware corporation and wholly-owned

subsidiary of the Company (“Merger Sub”) and Runway Growth Credit Fund Inc.

(“Runway”), solely in its

capacity as a seller representative, pursuant to which Merger Sub merged with and into CareCloud (the “Merger”), with

CareCloud surviving as a wholly-owned subsidiary of the Company.

The Merger became effective simultaneously with the execution

of the Merger Agreement.

The revenues related to CareCloud have been included in the Company’s Healthcare IT segment.

acquisition has been accounted for as a business combination.

total consideration for the Merger included approximately $11.9 million paid in cash at closing, the assumption of a working capital

deficiency of approximately $5.1 million and 760,000 shares of the Company’s Preferred Stock.

The Merger Agreement provides

that if CareCloud’s 2020 revenues exceed $36 million, there will be an earn-out payment to the seller equal to such excess,

up to $3 million.

Based on the 2020 revenues, no earn-out payment was required.

Additional consideration included warrants to

purchase 2,000,000 shares of the Company’s common stock, 1,000,000 of which have an exercise price per share of $7.50 and

a term of two years, and the other 1,000,000 warrants have an exercise price per share of $10.00 and a term of three years.

summary of the total consideration is as follows:

CareCloud Purchase Price

($ in thousands)

Preferred stock

Contingent consideration

Total purchase price

the Preferred Stock consideration, 160,000 shares were placed in escrow for up to 24 months, and an additional 100,000 shares

were placed in escrow for up to 18 months, in both cases, to satisfy indemnification obligations of the seller for losses arising

from certain specified contingent liabilities.

Shares net of such losses will be released upon the joint instruction of the Company

and Runway in accordance with the applicable escrow terms.

Such shares are entitled to the monthly dividend, which will be paid

when, and if, the shares are released.

The Company accrues the dividend monthly on the Preferred Stock held in escrow.

July 2020, it was determined that 55,726 shares of the Preferred Stock would be released from escrow and cancelled since one of

the contingent liabilities was settled for the amount of the cancelled shares.

This included a cash payment of approximately $1.3

Dividends previously accrued on these shares of $102,000 were reversed as of June 30, 2020, since the amounts will not

need to be paid.

The remaining shares continue to be held in escrow.

Company’s Preferred Stock and warrants issued as part of the Merger consideration were issued in a transaction exempt from

registration under the Securities Act of 1933, as amended (the “Securities Act”).

The warrants were valued using the

Black-Scholes method.

The Company registered for resale under the Securities Act the Preferred Stock and the securities underlying

the warrants.

CareCloud acquisition added additional clients to the Company’s customer base.

The Company acquired CareCloud’s software

technology and related business, of which certain elements are currently subject to a civil regulatory investigation.

to previous acquisitions, this transaction broadened the Company’s presence in the healthcare information technology industry

through geographic expansion of its customer base and by increasing available customer relationship resources and specialized

trained staff.

Company engaged a third-party valuation specialist to assist the Company in valuing the assets acquired and liabilities assumed

from CareCloud.

The following table summarizes the purchase price allocation:

($ in thousands)

Accounts receivable

Prepaid expenses

Contract asset

Property and equipment

Operating lease right-of-use assets

Customer relationships

Other long term assets

Accounts payable

Accrued expenses

Current loan payable

Operating lease liabilities

Deferred revenue

Total purchase price allocation

acquired accounts receivable are recorded at fair value which represents amounts that have subsequently been paid or are expected

to be paid by clients.

The fair value of customer relationships was based on the estimated discounted cash flows generated by

these intangibles.

The goodwill from this acquisition is not deductible for income tax purposes and represents the Company’s

ability to have an expanded local presence in additional markets and operational synergies that we expect to achieve that would

not be available to other market participants.

weighted-average amortization period of the acquired intangible assets is approximately three years.

earned from the clients obtained from the CareCloud acquisition was approximately $31.7 million during the year ended December

April 3, 2019, the Company executed an asset purchase agreement (“APA”) to acquire substantially all of the assets

The purchase price was $1.6 million and

the assumption of certain liabilities, excluding acquisition-related costs of approximately $125,000 .

of Etransmedia.

The purchase price was $1.6 million and the assumption of certain liabilities, excluding acquisition-related costs

of approximately $125,000.

Per the APA, the acquisition had an effective date of April 1, 2019.

The acquisition has been accounted for as a business combination.

ETM acquisition added additional clients to the Company’s customer base and, similar to previous acquisitions, broadened

The acquisition has been accounted

for as a business combination.

Etransmedia 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 geographic expansion of its customer base

and by increasing available customer relationship resources and specialized trained staff.

purchase price allocation for ETM was performed by the Company and is summarized as follows:

purchase price allocation for Etransmedia was performed by the Company and is summarized as follows:

($ in thousands)

Customer relationships

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weighted-average amortization period of the acquired intangible assets is approximately three years.

earned beginning April 1, 2019, from the clients obtained from the ETM acquisition was approximately $5.1 million during the year

ended December 31, 2019.

May 7, 2018, the Company executed an asset purchase agreement (“Orion APA”) to acquire substantially all of the revenue

cycle, practice management, and group purchasing organization assets of Orion.

The purchase price was $12.6 million ,

excluding acquisition-related costs of approximately $245,000, which are included in general and administrative expense in the

consolidated statement of operations.

Per the Orion APA, the acquisition had an effective date of July 1, 2018.

The acquisition

has been accounted for as a business combination.

Orion acquisition added a significant number of clients to the Company’s customer base and, similar to previous acquisitions,

broadened the Company’s presence in the healthcare information technology industry through geographic expansion of its customer

base and by increasing available customer relationship resources and specialized trained staff.

The acquisition also included

Orion’s practice management and group purchasing services.

The practice management services provide three pediatric medical

practices with the nurses, administrative support, facilities, supplies, equipment, marketing, RCM, accounting and other non-clinical

services needed to efficiently operate the practices.

The group purchasing services enable medical providers to purchase various

vaccines directly from selected pharmaceutical companies at a discounted price.

Company engaged a third party valuation specialist to assist the Company in valuing the assets and assumed liabilities acquired

The following table summarizes the purchase price allocation.

Customer relationships

Accounts receivable

Contract asset

Property and equipment

Accounts payable

Accrued expenses

acquired accounts receivable are recorded at fair value which represents amounts that have subsequently been paid or are expected

to be paid by clients.

The inventory acquired represents vaccines held at the managed practices.

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 and represents the Company’s ability to have an expanded local presence

in additional markets, operational synergies that we expect to achieve that would not be available to other market participants

and the ability to offer group purchasing and practice management services.

weighted-average amortization period of the acquired intangibles is eight years.

earned from the customers obtained from the Orion acquisition was approximately $29 million during the year ended December 31,

connection with some of the Company’s acquisitions, contingent consideration as of December 31, 2018 was payable in the

form of cash with payment terms through 2019.

Depending on the terms of the agreement, if the performance measures are not achieved,

the Company may pay less than the recorded amount, and if the performance measures are exceeded, the Company may pay more than

the recorded amount.

The contingent consideration liability was fully settled during 2019.

earned from the clients obtained from the Etransmedia acquisition was approximately $3.9 million during the year ended December

forma financial information (Unaudited)

unaudited pro forma information below represents the consolidated results of operations as if the Orion and ETM acquisitions occurred

on January 1, 2018.

It includes revenue from the clients who had cancelled prior to each acquisition and costs and expenses discontinued

before each acquisition.

The pro forma information has been included for comparative purposes and is not indicative of results

of operations of 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 adjustments related to (a) additional amortization of purchased intangible

assets, (b) expenses are directly attributable to the acquisitions, (c) reversal of goodwill impairment, (d) adjustments for income

taxes and (e) adjustments of intercompany balances.

unaudited pro forma information below represents the condensed consolidated results of operations as if the Etransmedia, CareCloud

and Meridian acquisitions occurred on January 1, 2019.

The pro forma information has been included for comparative purposes and

is not indicative of results of operations that 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 revenue and the pro forma revenue

for the year ended December 31, 2020 is approximately $17.6 million of additional revenue recorded by Meridian as well as approximately

$617,000 recorded by CareCloud prior to their acquisitions by MTBC.

The difference between the actual revenue and the pro forma

revenue for the year ended December 31, 2019 is approximately $50.8 million of additional revenue recorded by Meridian, $33.4

million of revenue recorded by CareCloud and $2.1 million of revenue recorded by Etransmedia prior to their acquisition by MTBC.

Year ended December 31,

($ in thousands except per share amounts)

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Net loss per common share

AND Intangible Assets –

GOODWILL AND Intangible Assets –

consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired.

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is the summary of the changes to the carrying amount of goodwill for the years ended December 31, 2020 and 2019:

December 31, 2019

December 31, 2018

Year ended December 31,

($ in thousands)

Beginning gross balance

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Relationships

($ in thousands)

Balance, January 1, 2020

Capitalized software costs and other intangible assets

Capitalized software costs

Other intangible assets

Translation loss

Allocation from 2019 acquisition

Allocation from 2020 acquisitions

Balance, December 31, 2020

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Balance, January 1, 2019

Capitalized software costs and other intangible assets

Capitalized software costs

Translation loss

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Net book value

Other intangible

assets primarily represent software costs.

Amortization expense was approximately $2.1 million for both the years ended December

31, 2019 and 2018.

The weighted-average amortization period is seven years.

As of December

31, 2019, future amortization expense scheduled to be expensed is as follows:

and Equipment

equipment as of December 31, 2019 and 2018 consisted of the following:

December 31, 2019

December 31, 2018

intangible assets primarily represent software costs.

Amortization expense was approximately $8.6 million and $2.1 million for

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

The weighted-average amortization period is four years.

of December 31, 2020, future amortization expense scheduled to be expensed is as follows:

($ in thousands)

Property and Equipment

and equipment consisted of the following:

Year ended December 31,

($ in thousands)

Computer equipment

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Property and equipment –

expense was approximately $909,000 and $688,000 for the years ended December 31, 2019 and 2018, respectively.

expense was approximately $1.4 million and $909,000 for the years ended December 31, 2020 and 2019, respectively.

Concentrations

Risks —

As of December 31, 2019 and 2018, the Company held cash of approximately $1.0 million and $77,000 respectively,

As of December 31, 2020 and 2019, the Company held cash of approximately $1.4 million and $1.0 million, respectively,

in the name of its subsidiaries, at banks in Pakistan and Sri Lanka.

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for approximately 9% and 5% of accounts receivable, respectively.

During both the years ended December 31, 2019 and 2018, there

was one customer with sales of approximately 10% of total revenue.

During the years ended December 31, 2020 and 2019, there was

one customer with sales of approximately 7% and 10% of total revenue, respectively.

Risks —

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and remittance, and rates and methods of taxation.

amounts of net assets located outside the United States were approximately $1.7 million and $162,000 as of December 31,

amounts of net assets located outside the United States were approximately $4.5 million and $1.7 million as of December 31, 2020

and 2019, respectively.

These balances exclude intercompany receivables of approximately $7.1 million and $7.6 million

as of December 31, 2019 and 2018, respectively.

The following is a summary of the net assets located outside the United States

as of December 31, 2019 and 2018:

These balances exclude intercompany receivables of approximately $5.6 million and $7.1 million as of December

31, 2020 and 2019, respectively.

The following is a summary of the net assets located outside the United States as of December

31, 2020 and 2019:

Year ended December 31,

($ in thousands)

Current assets

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Non-current liabilities

LOss per COMMON share

NET LOss per COMMON share

following table reconciles the weighted-average shares outstanding for basic and diluted net loss per common share for the years

ended December 31, 2020 and 2019:

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

Basic and Diluted:

Net loss attributable to common shareholders

$ (7,257,954 )

$ (6,962,467 )

Weighted-average common shares used to compute basic and diluted loss per share

Net loss attributable to common shareholders per share - Basic and Diluted

restricted stock units (“RSUs”), the 200,000 warrants granted to Opus Bank (“Opus”) and the 153,489 warrants

granted to Silicon Valley Bank (“SVB”) have been excluded from the above calculations as they were anti-dilutive.

Vested RSUs and vested restricted shares have been included in the above calculations.

During October 2017, the Company opened a revolving line of credit from SVB under a three-year agreement which replaced the previous

credit facility from Opus.

The SVB credit facility is a secured revolving line of credit where borrowings are based on a formula

of 200% of repeatable revenue adjusted by an annualized attrition rate as defined in the credit agreement.

During the third quarter

of 2018, the credit line was increased from $5 million to $10 million and the term was extended for an additional year.

December 31, 2019, and 2018, there were no borrowings under the credit facility.

Interest on the SVB revolving line of credit

is currently charged at the prime rate plus 1.50%.

There is also a fee of one-half of 1% annually for the unused portion of the

The debt is secured by all of the Company’s domestic assets and 65% of the shares in its offshore subsidiaries.

unvested restricted stock units (“RSUs”) and unexercised warrants have been excluded from the above calculations as

they were anti-dilutive.

Vested RSUs, vested restricted shares and exercised warrants have been included in the above calculations.

During October 2017, the Company opened a revolving line of credit from Silicon Valley Bank (“SVB”) under

a three-year agreement which replaced the previous credit facility from Opus.

The SVB credit facility is a secured revolving line

of credit where borrowings are based on a formula of 200% of repeatable revenue adjusted by an annualized attrition rate as defined

in the credit agreement.

During the third quarter of 2018, the credit line was increased from $5 million to $10 million and the

term was extended for an additional year.

As of December 31, 2020, and 2019, there were no borrowings under the credit facility.

Interest on the SVB revolving line of credit is currently charged at the prime rate plus 1.50%.

There is also a fee of one-half

of 1% annually for the unused portion of the credit line.

The debt is secured by all of the Company’s domestic assets and

65% of the shares in its offshore subsidiaries.

Future acquisitions are subject to approval by SVB.

In connection

with the original SVB debt agreement, the Company paid SVB approximately $50,000 of fees upfront and issued warrants for SVB to

purchase 125,000 shares of its common stock, and committed to pay an annual anniversary fee of $50,000 a year.

Based on the terms

in the original SVB credit agreement, these warrants have a strike price equal to $3.92.

They have a five-year exercise window

and net exercise rights, and were valued at $3.12 per warrant.

As a result of the revision in the SVB credit line, which increased

the credit line from $5 million to $10 million and reduced the interest rate by 25 basis points, the Company paid approximately

connection with the original SVB debt agreement, the Company paid SVB approximately $50,000 of fees upfront and issued warrants

for SVB to purchase 125,000 shares of its common stock, and committed to pay an annual anniversary fee of $50,000 a year.

on the terms in the original SVB credit agreement, these warrants have a strike price equal to $3.92.

They have a five-year exercise

window and net exercise rights, and were valued at $3.12 per warrant.

As a result of the revision in the SVB credit line, which

increased the credit line from $5 million to $10 million and reduced the interest rate by 25 basis points, the Company paid approximately

$50,000 of fees upfront and issued an additional 28,489 warrants, with a strike price equal to $5.26, a five-year exercise window

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At December 31, 2020 and 2019, the Company was in compliance with all covenants.

During November

2019 the Company modified its loan agreement with SVB, which adjusted the required monthly EBITDA amounts and does not require

the Company to comply with financial covenants as long as there have been no borrowings on the revolving credit line for the prior

Vehicle Financing

Notes —

November 2019, the Company modified its loan agreement with SVB, which adjusted the required monthly EBITDA amounts and does not

require the Company to comply with financial covenants as long as there have been no borrowings on the revolving credit line for

the prior six months.

September 2020, the agreement with SVB was modified to include CareCloud and Meridian as borrowers.

The annual covenants were

set for the following year.

Financing Notes —

The Company financed certain vehicle purchases both in the United States and in Pakistan.

The vehicle financing

notes have three to six year terms and were issued at current market rates.

financing notes have three to six year terms and were issued at current market rates.

Financing —

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The interest rate charged

Managed Practices —

As a result of the Orion acquisition, the Company assumed a payable to the managed practices at

that time of $236,000, which is non-interest bearing.

to Managed Practices —

As a result of the Orion acquisition, the Company assumed a payable to the managed practices

at that time of $236,000, which is non-interest bearing.

As of December 31, 2020, the balance was $26,000.

Maturities of

the outstanding notes payable and other obligations as of December 31, 2019 are as follows:

of the outstanding notes payable and other obligations as of December 31, 2020 are as follows:

Year ending December 31

Vehicle Financing Notes

Insurance Financing

Payable to Managed

Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers , which was adopted January

1, 2018 using the modified retrospective method.

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

Under the new standard, 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 revenue cycle management services, the Company estimates

the value of the consideration it will earn over the remaining contractual period as our 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 new standard.

The timing of the

revenue recognition of our other revenue streams were not materially impacted by the adoption of ASC 606.

Payable to Managed Practices

($ in thousands)

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 revenue cycle

management services, the Company estimates the value of the consideration it will earn over the remaining contractual period as

our 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 new standard.

The timing of the revenue recognition of our other revenue streams were not materially impacted by the

adoption of ASC 606.

of our current contracts with customers contain a single performance obligation.

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of Revenue from Contracts with Customers

derive revenue from seven primary sources:

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)

derive revenue from eight primary sources:

(1) revenue cycle management services, (2) SaaS solutions, (3) professional services,

(4) ancillary services, (5) group purchasing services, (6) printing and mailing services, (7) clearinghouse and EDI (electronic

data interchange) services and (8) practice management services.

following table represents a disaggregation of revenue for the years ended December 31, 2020 and 2019:

Year Ended December 31,

Healthcare IT:

($ in thousands)

Revenue cycle management services

SaaS solutions

Professional services

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Practice management services

Revenue cycle

management services:

cycle management services are the recurring process of submitting and following up on claims with health insurance companies in

cycle management services:

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.

MTBC typically invoices customers on a monthly

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 services include

use of practice management software and related tools (on a software-as-a-service (“SaaS”) basis), electronic health

records (on a SaaS basis), medical billing services and use of mobile health solutions.

The fee for these services

typically includes use of practice management software and related tools (on a software-as-a-service (“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.

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

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.

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

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

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

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.

revenue streams:

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electronically to insurance companies.

MTBC invoices customers on a monthly basis based on the number of claims submitted and

The Company invoices customers on a monthly basis based on the number of claims submitted and

the agreed-upon rate in the agreement.

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Company assumes all financial risk for the performance of the managed medical practices.

Revenue is impacted by 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 impacts the management fee that the Company

is entitled to.

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 impacts the management fee that

the Company is entitled to.

Billing rates are reviewed at least annually and adjusted based on current insurer reimbursement practices.

performance obligation is satisfied as the management services are provided.

The performance obligation is satisfied as the management services are provided.

contracts for practice management services have approximately an additional 20 years remaining and are only cancellable under

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statements of operations.

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 management

fee is computed at each month end.

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.

about contract balances:

As of December

31, 2019, the estimated revenue expected to be recognized in the future related to the remaining revenue cycle management performance

obligations outstanding was approximately $2.0 million.

We expect to recognize substantially all of the revenue for the remaining

performance obligations over the next three months.

Approximately $374,000 of the contract asset represents revenue earned, not

paid, from the group purchasing services.

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.

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:

Accounts Receivable,

Deferred Revenue

of December 31, 2020, the estimated revenue expected to be recognized in the future related to the remaining revenue cycle management

performance obligations outstanding was approximately $3.7 million.

We expect to recognize substantially all of the revenue for

the remaining performance obligations over the next three months.

Approximately $355,000 of the contract asset represents revenue

earned, not paid, from the group purchasing services.

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.

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.

opening and closing balances of the Company’s accounts receivable, contract asset and deferred revenue are as follows:

Accounts Receivable, Net

Contract Asset

Deferred Revenue (current)

Deferred Revenue (long term)

($ in thousands)

Balance as of January 1, 2020

Orion acquisition

CareCloud acquisition

Meridian acquisition

(Decrease) increase, net

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Balance as of January 1, 2019

ETM acquisition

Etransmedia acquisition

Decrease, net

Balance as of December 31, 2019

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

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 $29,000 and $93,000 at December 31, 2019 and 2018,

respectively, and are included in the Other Assets lines in the consolidated balance sheets.

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 $970,000 and $29,000 at December 31,

2020 and 2019, respectively, and are included in the Other Assets amounts in the consolidated balance sheets.

SHAREHOLDERS’

Directors of the Company previously approved stock repurchase programs.

Board of Directors of the Company previously approved stock repurchase programs.

The last program expired January 25, 2017.

of these stock repurchases, the Company has 740,799 shares held as treasury stock at an aggregate cost of $662,000.

There were no

common stock offerings during 2019 and 2018.

Holders of our

common stock are entitled to one vote for each share held on all matters properly submitted to a vote of shareholders on which

holders of common stock are entitled to vote.

Holders of common stocks are entitled to receive dividends only at times and amounts

as determined by the Board of Directors.

The common stock is not entitled to pre-emptive rights, and is not subject to conversion,

redemption or sinking fund provisions.

During the year

ended December 31, 2019, the Company completed a public offering of 373,000 shares of its Preferred Stock at the prevailing market

price, raising net proceeds of approximately $9.6 million after underwriting commissions and other directly attributable expenses.

During the year

ended December 31, 2018, the Company completed two public offerings of approximately one million shares of its Preferred Stock

at $25.00 per share, raising net proceeds of approximately $22.8 million after underwriting commissions and expenses.

the Preferred Stock of $2.75 annually per share are cumulative from the date of issue and are payable each month when, as and

a result of these stock repurchases, the Company has 740,799 shares held as treasury stock at an aggregate cost of $662,000.

were no common stock offerings during 2020 and 2019.

of our common stock are entitled to one vote for each share held on all matters properly submitted to a vote of shareholders on

which holders of common stock are entitled to vote.

Holders of common stocks are entitled to receive dividends only at times and

amounts as determined by the Board of Directors.

The common stock is not entitled to pre-emptive rights, and is not subject to

conversion, redemption or sinking fund provisions.

the year ended December 31, 2020, the Company completed two public offerings totaling 1,932,000 shares of its Preferred Stock

at $25 per share, raising net proceeds of approximately $44.5 million after underwriting commissions and other directly attributable

the year ended December 31, 2019, the Company completed a public offering of 373,000 shares of its Preferred Stock at the prevailing

market price, raising net proceeds of approximately $9.6 million after underwriting commissions and other directly attributable

on the Preferred Stock of $2.75 annually per share are cumulative from the date of issue and are payable each month when, as and

if declared by the Company’s Board of Directors.

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on the Preferred Stock payable through February 2021.

Commencing on

or after November 4, 2020, the Company may redeem, at its option, the Preferred Stock, in whole or in part, at a cash redemption

price of $25.00 per share, plus all accrued and unpaid dividends to, but not including, the redemption date.

The Preferred Stock

has no stated maturity, is not subject to any sinking fund or other mandatory redemption, and is not convertible into or exchangeable

November 4, 2020, the Company may redeem, at its option, the Preferred Stock, in whole or in part, at a cash redemption price

of $25.00 per share, plus all accrued and unpaid dividends to, but not including, the redemption date.

The Preferred Stock has

no stated maturity, is not subject to any sinking fund or other mandatory redemption, and is not convertible into or exchangeable

for any of the Company’s other securities.

7 unchanged sentences

symbol “MTBCP.”

has issued 2,353,489 warrants for its common stock, of which 353,489 remained outstanding at December 31, 2018.

The 2,000,000

Company has issued 6,603,489 warrants for its common stock, of which 4,010,140 remained outstanding at December 31, 2020.

2,000,000 warrants previously issued at a $5.00 exercise price expired in May 2018.

The outstanding warrants consist of 100,000 warrants at

a $5 exercise price which will expire in September, 2022, 125,000 warrants at a $3.92 exercise price which will expire in October

2022, 100,000 warrants at a $5 exercise price which will expire in July 2023 and 28,489 warrants at a $5.26 exercise price which

will expire in September 2023.

and Contingencies

The outstanding warrants consist of 100,000

warrants at a $5.00 exercise price which will expire in September 2022, 125,000 warrants at a $3.92 exercise price which will

expire in October 2022, 100,000 warrants at a $5.00 exercise price which will expire in July 2023, 28,489 warrants at a $5.26

exercise price which will expire in September 2023, 1,000,000 warrants at a $7.50 exercise price which will expire in January

2022, 1,000,000 warrants at a $10.00 exercise price which will expire in January 2023 and 2,250,000 warrants at a $7.50 exercise

price which will expire in June 2022.

During 2020, 593,349 warrants were exercised at the $7.50 exercise price.

Subsequent to

December 31, 2020, 858,000 warrants were exercised at the $7.50 exercise price.

Company incurs common and Preferred Stock offering costs which consist principally of professional fees, primarily legal and accounting,

and other costs such as printing and registration costs.

In connection with the 2020 and 2019 equity offerings, the Company incurred

approximately $205,000 and $110,000, respectively, of such costs, excluding underwriting commissions and placement agent fees.

Commitments and Contingencies

Proceedings —

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stayed pending the appeal.

April 23, 2019, the Appellate Division reversed the Chancery Court’s ruling that MTBC is required to participate in the

Arbitration and remanded the case for further proceedings before the Chancery Court on that issue.

The Appellate Division upheld

the Chancery Court’s ruling that MAC was required to participate in the Arbitration.

The parties have completed discovery

in the remanded matter, and both MTBC and RPRWC filed cross-motions for summary judgement in their favor.

On February 6, 2020,

the Chancery Court denied RPRWC’s motion for summary judgment and granted MTBC’s cross-motion for summary judgment.

The Chancery Court held that MTBC cannot be compelled to participate in the Arbitration.

RPRWC has informed MTBC that it does

not intend to appeal the Chancery Court’s ruling and that it intends to move forward solely against MAC in the Arbitration.

compensatory damages of $6.6 million, plus costs, for MPMA’s alleged breach of the billing services agreement.

RPRWC’s

breach of contract and compensatory damages claims have not been the subject of the ongoing court proceedings, which have focused

solely on whether RPRWC can compel MTBC and MAC to arbitrate its claim.

Thus, RPRWC has not yet provided MAC with information

sufficient to enable it to estimate a range of possible losses that may arise from the Arbitration.

MAC intends to vigorously

defend against RPRWC’s claims.

If RPRWC is successful in the Arbitration, MAC anticipates the award would be substantially

less than the amount claimed.

time, we may become involved in other legal proceedings arising in the ordinary course of our business.

Including the proceeding

described above, we are not presently a party to any legal proceedings that, in the opinion of our management, would individually

or taken together have a material adverse effect on our business, consolidated results of operations, financial position or cash

flows of the Company.

if an arrangement is a lease at inception.

Operating leases are included in operating lease ROU assets, current operating lease

liability and non-current operating lease liability in our consolidated balance sheet as of December 31, 2019.

The Company does

not have any finance leases.

ROU assets represent

our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments

arising from the lease.

ROU assets and liabilities are recognized at the lease commencement date based on the estimated present

value of lease payments over the lease term.

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.

For leases in existence at the adoption of ASC 842, we used the incremental borrowing rate as of January

We give consideration to our bank financing arrangements, geographical location and collateralization of assets when

calculating our incremental borrowing rates.

Our lease terms

include options to extend the lease when it is reasonably certain that we will exercise that option.

Leases with a term of less

than 12 months are not recorded in the consolidated balance sheet.

Our lease agreements do not contain any residual value guarantees.

On April 23, 2019, the Appellate Division reversed the Chancery Court’s ruling that MTBC is required to participate in the Arbitration

and remanded the case for further proceedings before the Chancery Court on that issue.

The Appellate Division upheld the Chancery Court’s

ruling that MAC was required to participate in the Arbitration.

The parties completed discovery in the remanded matter, and both MTBC

and RPRWC filed cross-motions for summary judgement in their favor.

On February 6, 2020, the Chancery Court denied RPRWC’s motion

for summary judgment and granted MTBC’s motion for summary judgment, holding that MTBC cannot be compelled to participate in the

RPRWC has informed MTBC that it does not intend to appeal the Chancery Court’s ruling and that it intends to move forward

solely against MAC in the Arbitration.

On March 25, 2020, the Chancery Court lifted the stay of arbitration relative to RPRWC and MAC.

Due to conflicting information provided by RPRWC, it is unclear what the extent of the claimed damages are in this matter which at this

time appear to be entirely speculative.

According to its arbitration demand, RPRWC seeks compensatory damages of $6.6 million, plus costs,

for MPMA’s alleged breach of the billing services agreement.

On June 12, 2020, in response to a directive from the arbitrator, RPRWC

disclosed a statement of damages to MAC in which it increased its alleged damages from $6.6 million and costs to $20 million and costs.

On July 24, 2020, RPRWC disclosed a declaration to MAC, in which RPRWC estimates its damages to be approximately $11 million plus costs.

MAC intends to vigorously defend against RPRWC’s claims.

If RPRWC is successful in the Arbitration, MTBC and MAC anticipate the

award would be substantially less than the amount claimed.

Through the CareCloud transaction, we acquired its software technology and

related business, of which certain elements are currently subject to a civil investigation to determine compliance with certain federal

regulatory requirements pre-acquisition.

The Company has continued to cooperate with the inquiry as CareCloud has historically done since

the commencement of the investigation in July of 2018.

This element was considered as part of the transaction and we believe that the

continued investigation will have no material impact on our consolidated financial statements, and that we have properly protected ourselves

from liability through the negotiated structure of the transaction.

Specifically, $4 million of the transaction’s consideration

was held in escrow for the resolution of this investigation.

Based on the Company’s discussions with the U.S.

Department of Justice,

we believe that $3.8 million is a reasonable estimate to resolve this investigation, in addition to an estimated $400,000 in additional

costs and fees.

The Company has accrued $4.2 million dollars to resolve this investigation, of which up to $4 million is the escrow, which

has been recorded as an indemnification asset which is included in the consolidated balance sheet in prepaid expenses and other current

assets with an offsetting amount in accrued expenses.

The Company currently believes that any potential settlement will be substantially

within the range covered by the escrowed funds.

However, the outcome cannot yet be determined.

From time to time, we may become involved in other legal proceedings arising in the ordinary course of our business.

Including the proceedings

described above, we are not presently a party to any legal proceedings that, in the opinion of our management, would individually or taken

together have a material adverse effect on our business, consolidated results of operations, financial position or cash flows of the Company.

determine if an arrangement is a lease at inception.

Operating leases are included in operating lease ROU assets, current operating

lease liability and non-current operating lease liability in our consolidated balance sheets as of December 31, 2020 and 2019.

The Company does not have any finance leases.

assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make

lease payments arising from the lease.

ROU assets and liabilities are recognized at the lease commencement date based on the estimated

present value of lease payments over the lease term.

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.

For leases in existence at the adoption of ASC 842, we used the incremental borrowing

rate as of January 1, 2019.

We give consideration to our bank financing arrangements, geographical location and collateralization

of assets when calculating our incremental borrowing rates.

lease terms include options to extend the lease when it is reasonably certain that we will exercise that option.

Leases with a

term of less than 12 months are not recorded in the 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 is re-measured using the current incremental borrowing

During the year ended December 31, 2019, a lease impairment of approximately $170,000 was recorded since the Company is

no longer using one of its leased facilities and is currently in the process of subleasing the space.

Restructuring charges of

approximately $49,000 were recorded in the year ended December 31, 2019 which represent the remaining lease costs for another

leased facility that was closed and the employees were transferred to another Company facility.

of our facilities and some equipment.

Lease expense is included in direct operating costs and general and administrative expenses

in the consolidated statements of operations based on the nature of the expense.

As of December 31, 2019, we had 29 leased properties,

five in Practice Management and 24 in Healthcare IT, with remaining terms ranging from less than one year to four years.

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.

leases include escalation clauses and termination options that are factored in the determination of the lease payments when appropriate.

a lease is modified after the effective date, the operating lease ROU asset and liability is re-measured using the current incremental

borrowing rate.

We review our incremental borrowing rate for our portfolio of leases on a quarterly basis.

During the years ended

December 31, 2020 and 2019, lease impairment of approximately $298,000 and $170,000 was recorded since the Company is no longer

using certain leased facilities and is currently in the process of subleasing the space.

Restructuring charges of approximately

$49,000 were recorded in the year ended December 31, 2019 which represent the remaining lease costs for another leased facility

that was closed and the employees were transferred to another Company facility.

There were no restructuring charges in the year

ended December 31, 2020.

lease all of our facilities and some equipment.

Lease expense is included in direct operating costs and general and administrative

expenses in the consolidated statements of operations based on the nature of the expense.

As of December 31, 2020, we had 38 leased

properties, five in Practice Management and 33 in Healthcare IT, with remaining terms ranging from less than one year to five

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.

We also have some related party leases –

components of lease expense were as follows:

December 31, 2019

($ in thousands)

Operating lease cost

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Total- net lease cost

Short-term lease

cost represents leases that were not capitalized as the lease term as of the later of January 1, 2019 or the beginning of the

lease was less than 12 months.

Short-term lease cost represents leases that

were not capitalized as the lease term as of the later of January 1, 2019 or the beginning of the lease was less than 12 months.

Variable lease costs include utilities, real estate taxes and common area maintenance costs.

1 unchanged sentence

December 31, 2020

December 31, 2019

Operating leases:

($ in thousands)

Operating lease ROU assets, net

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cash flow and other information related to leases was as follows:

December 31, 2019

($ in thousands)

Cash paid for amounts included in the measurement of lease liabilities:

1 unchanged sentence

ROU assets obtained in exchange for lease liabilities:

Operating leases, net of restructuring, impairment and terminations

Operating leases, net of impairment and terminations

of lease liabilities are as follows:

Operating leases - Year ended December 31,

Operating leases - Year ending December 31,

($ in thousands)

Total lease payments

3 unchanged sentences

Long-term lease obligations

As of December

31, 2019, we have one operating lease commitment with a six year term that commences on January 1, 2020 aggregating approximately

$1.0 million.

For comparative

periods prior to the adoption of the new accounting guidance on January 1, 2019, we have retained the following disclosures as

previously reported.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2018 were as follows:

Operating leases

had sales to a related party, a physician who is the wife of the Executive Chairman.

Revenues from this customer were approximately

$21,000 for the year ended December 31, 2019 and approximately $20,000 for the year ended December 31, 2018.

As of December 31,

2019 and 2018, the accounts receivable balance due from this customer was approximately $2,000 and $1,600, respectively and is

included in accounts receivable in the consolidated balance sheets.

is a party to a nonexclusive aircraft dry lease agreement with Kashmir Air, Inc.

(“KAI”), which is owned by the Executive

The Company recorded expense of approximately $137,000 and $128,000, for the years ended December 31, 2019 and 2018,

respectively.

As of December 31, 2019 and 2018, the Company had liabilities outstanding to KAI of approximately $1,000 and $11,000,

which are included in accrued liability to related party in the consolidated balance sheets.

The original aircraft lease expired

on March 31, 2019 and was not included in the ROU asset at January 1, 2019.

A lease for a different aircraft at the same lease

rate was entered into as of April 1, 2019 and has been included in the ROU asset and operating lease liability at December 31,

leases its corporate offices in New Jersey, its temporary housing for its foreign visitors, an office/storage facility and its

backup operations center in Bagh, Pakistan, from the Executive Chairman.

The related party rent expense for the years ended December

31, 2019 and 2018 was approximately $192,000 and $187,000, respectively, and is included in direct operating costs and general

and administrative expense in the consolidated statements of operations.

During the year ended December 31, 2019, the Company

spent approximately $330,000 to upgrade two of the leased facilities.

Current assets-related party in the consolidated balance

sheets includes security deposits and prepaid rent related to the leases of the Company’s corporate offices in the amount

of $13,000 and $25,000 as December 31, 2019 and 2018, respectively.

the ROU asset at December 31, 2019 is approximately $566,000 applicable to the related party leases.

Included in the current and

non-current operating lease liability at December 31, 2019 is approximately $275,000 and $298,000, respectively, applicable to

the related party leases.

Benefit PlanS

has a qualified 401(k) plan covering all U.S.

employees of MTBC, Inc.

and MAC who have completed one month of service.

provides for matching contributions by the Company equal to 100% of the first 3% of qualified compensation, plus 50% of the next

The Company also maintain a qualified 401(k) plan for MHI, MPM and MED employees who have completed one month of service.

There is a discretionary match for MHI and MED employees equal to 50% of the first 3% of qualified compensation.

There is no match

for MPM employees.

Employer contributions to the plans for the years ended December 31, 2019 and 2018 were approximately $255,000

of December 31, 2020, we have two operating lease commitments that have not yet commenced with an aggregate gross lease liability

of approximately $1.6 million.

Related PARTIES

Company had sales to a related party, a physician who is the wife of the Executive Chairman.

Revenues from this customer were

approximately $17,000 for the year ended December 31, 2020 and approximately $21,000 for the year ended December 31, 2019.

of both December 31, 2020 and 2019, the accounts receivable balance due from this customer was approximately $2,000 and is included

in accounts receivable in the consolidated balance sheets.

Company is a party to a nonexclusive aircraft dry lease agreement with Kashmir Air, Inc.

(“KAI”), which is owned by

the Executive Chairman.

The Company recorded expense of approximately $120,000 and $137,000, for the years ended December 31,

2020 and 2019, respectively.

As of both December 31, 2020 and 2019, the Company had liabilities outstanding to KAI of approximately

$1,000, which are included in accrued liability to related party in the consolidated balance sheets.

The original aircraft lease

expired on March 31, 2019 and was not included in the ROU asset at January 1, 2019.

A lease for a different aircraft at the same

lease rate was entered into as of April 1, 2019 and has been included in the ROU asset and operating lease liabilities at December

31, 2020 and 2019.

Company leases its corporate offices in New Jersey, its temporary housing for its foreign visitors, an office/storage facility

and its backup operations center in Bagh, Pakistan, from the Executive Chairman.

The related party rent expense for the years

ended December 31, 2020 and 2019 was approximately $185,000 and $192,000, respectively, and is included in direct operating costs

and general and administrative expense in the consolidated statements of operations.

During the year ended December 31, 2020,

the Company spent approximately $554,000 to upgrade two of the leased facilities.

Current assets-related party in the consolidated

balance sheets includes security deposits and prepaid rent related to the leases of the Company’s corporate offices in the

amount of $13,000 for both the years ended December 31, 2020 and 2019.

in the ROU asset at December 31, 2020 is approximately $283,000 applicable to the related party leases.

Included in the current

and non-current operating lease liability at December 31, 2020 is approximately $202,000 and $92,000, respectively, applicable

to the related party leases.

in the ROU asset at December 31, 2019 is approximately $566,000 applicable to the related party leases.

Included in the current

and non-current operating lease liability at December 31, 2019 is approximately $275,000 and $298,000, respectively, applicable

to the related party leases.

the first quarter of 2020, talkMD Clinicians, PA, a New Jersey corporation was formed to provide telehealth services.

is owned by the wife of the Executive Chairman since an entity providing medical services must be owned by a physician.

did not have any transactions with this entity during the year ended December 31, 2020.

Employee Benefit PlanS

Company has qualified 401(k) plans covering all U.S.

employees who have completed one month of service.

The plans provide for

matching contributions by the Company for employees of MTBC, Inc.

and most U.S.

subsidiaries, although there is no match for MPM

Employer contributions to the plans for the years ended December 31, 2020 and 2019 were approximately $641,000 and

$255,000, respectively.

Additionally,

the Company has a defined contribution retirement plan covering all employees located in Pakistan who have completed three months

The plan provides for monthly contributions by the Company which are the lower of 10% of qualified employees’

basic monthly compensation or 2,500 Pakistani rupees.

the Company has a defined contribution retirement plan covering all employees located in our Pakistan Offices who have

completed three months of service.

The plan provides for monthly contributions by the Company which are equal to 10% of

qualified employees’

basic monthly compensation.

The Company’s contributions for the years ended December 31,

2020 and 2019 were approximately $341,000 and $245,000, respectively.

maintains a defined contribution retirement plan covering all employees in Sri Lanka.

Company maintains a defined contribution retirement plan covering all employees in Sri Lanka.

The employee and employer contribute

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The Company’s contribution for the year ended December 31,

2019 and 2018 were approximately $40,000 and $56,000, respectively.

2020 and 2019 was approximately $37,000 and $40,000, respectively.

The contributions are required to be deposited with the Employees’

Provident Fund Organization, a government owned entity.

In April 2014,

the Company adopted the Medical Transcription Billing, Corp.

2014 Equity Incentive Plan (the “2014 Plan”), reserving

a total of 1,351,000 shares of common stock for grants to employees, officers, directors and consultants.

During 2017, the 2014

Plan was amended whereby an additional 1,500,000 shares of common stock and 100,000 shares of Preferred Stock were added to the

plan for future issuance.

During 2018, an additional 200,000 shares of Preferred Stock was added to the plan for future issuance.

The 2014 Plan was amended and restated on April 14, 2017 (the “Amended and Restated Equity Incentive Plan”).

December 31, 2019, 401,738 shares of common stock and 133,654 shares of Preferred Stock are available for grant.

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.

During the third

quarter of 2018, 68,000 RSUs of common stock were granted over two years equally to the four outside members of the Board of Directors

with 25% of the shares vesting every six months.

Also, during 2018, a total of 558,000 RSUs of common stock were granted to certain

Company executive officers and employees which vest over the next three years, at six-month intervals.

A total of 81,200 cash

settled common stock RSUs were granted to employees in Pakistan and Sri Lanka.

108,000 RSUs of common stock were granted to employees and independent contractors to vest at different dates during the year

In addition, 72,000 RSUs of common stock were granted over two years equally to the four outside members of the Board of

Directors with 25% of the shares vesting every six months.

The following

table summarizes the RSU and restricted stock transactions related to the common and Preferred Stock under the Amended and Restated

Incentive Plan for the years ended December 31, 2019 and 2018:

STOCK-BASED COMPENSATION

April 2014, the Company adopted the Medical Transcription Billing, Corp.

2014 Equity Incentive Plan (the “2014 Plan”),

reserving a total of 1,351,000 shares of common stock for grants to employees, officers, directors and consultants.

the 2014 Plan was amended whereby an additional 1,500,000 shares of common stock and 100,000 shares of Preferred Stock were added

to the plan for future issuance.

During 2018, an additional 200,000 shares of Preferred Stock was added to the plan for future

During 2020, an additional 2,000,000 shares of common stock and an additional 300,000 shares of Preferred Stock were

added to the 2014 Plan for future issuance.

The 2014 Plan was amended and restated on April 14, 2017 (the “Amended and Restated

Equity Incentive Plan”).

As of December 31, 2020, 1,718,012 shares of common stock and 370,075 shares of Preferred Stock

are available for grant.

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.

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.

2019, 180,000 RSUs of common stock were granted to employees and independent contractors to vest at different dates during the

years 2019 and 2020.

Included therein were 72,000 RSUs of common stock granted over two years equally to the four outside members

of the Board of Directors with 25% of the shares vesting every six months.

2020, 788,955 RSUs of common stock were granted to employees and independent contractors to vest at different dates during the

year 2020 and 2021.

Included therein were 32,000 RSUs of common stock granted over two years equally to the four outside members

of the Board of Directors with 25% of the shares vesting every six months.

following table summarizes the RSU and restricted stock transactions related to the common and Preferred Stock under the Amended

and Restated Incentive Plan for the years ended December 31, 2020 and 2019:

Preferred Stock

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Outstanding and unvested shares at December 31, 2020

Outstanding and unvested shares at January 1, 2019

Outstanding and unvested shares at December 31, 2019

As of December

31, 2019, and 2018, there was approximately $2.1 million and $2.5 million, respectively, of total unrecognized compensation cost

related to the common stock RSUs classified as equity that will be expensed through 2021.

of December 31, 2020, and 2019, there was approximately $2.5 million and $2.1 million, respectively, of total unrecognized compensation

cost related to the common stock RSUs classified as equity that will be expensed through 2022.

There was no unrecognized compensation

cost related to the Preferred Stock RSUs.

outstanding and unvested common stock RSUs at December 31, 2019, 421,751 RSUs are classified as equity and 29,333 RSUs are classified

as a liability.

the total outstanding and unvested common stock RSUs at December 31, 2020, 369,435 RSUs are classified as equity and 13,000 RSUs

are classified as a liability.

All of the Preferred Stock RSUs are classified as equity.

The following

table summarizes the share activity during the years ended December 31, 2019 and 2018 and the amount of common and Preferred Shares

available for grant at December 31, 2019:

following table summarizes the share activity during the years ended December 31, 2020 and 2019 and the amount of common and Preferred

Shares available for grant at December 31, 2020:

Preferred Stock

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Shares available for grant at December 31, 2020

Shares available for grant at January 1, 2019

RSUs forfeited

Shares available for grant at December 31, 2019

The liability

for the cash-settled awards was approximately $741,000 and $118,000 at December 31, 2019 and 2018, respectively, and is included

in accrued compensation in the consolidated balance sheets.

liability for the cash-settled awards was approximately $976,000 and $741,000 at December 31, 2020 and 2019, respectively, and

is included in accrued compensation in the consolidated balance sheets.

During the years ended December 31, 2020 and 2019, approximately

$61,000 and $184,000, respectively, was paid in connection with the cash-settled awards.

2018, the Compensation Committee approved executive bonuses to be paid in 44,000 and 40,000 shares respectively of Preferred Stock,

with the final number of shares and the amount based on specified performance criteria being achieved during 2019 and 2018.

2019, 4,746 shares of Preferred Stock were granted as performance bonuses and in lieu of sales commissions.

In 2018, an additional

Preferred Stock award of 4,800 shares was granted as a performance bonus to one employee.

Stock-based compensation expense recorded

during 2019 and 2018 for these awards was approximately $1.3 million and $1.2 million respectively, based on the fair value of

the Preferred Shares on the grant date.

During January 2020 and February 2019, the Compensation Committee determined that the

financial objectives were attained and all of the shares were issued including the performance bonus shares.

both 2020 and 2019, the Compensation Committee approved executive bonuses to be paid in 44,000 shares of Preferred Stock, with

the final number of shares and the amount based on specified performance criteria being achieved during 2020 and 2019.

and 2019, 19,579 and 4,746 shares of Preferred Stock were granted as performance bonuses and in lieu of sales commissions, respectively.

Stock-based compensation expense recorded during 2020 and 2019 for these awards was approximately $1.6 million and $1.3 million,

respectively, based on the fair value of the Preferred Shares on the grant date.

During January 2021 and January 2020, the Compensation

Committee determined that the financial objectives were attained and all of the performance bonus shares were issued.

compensation expense

recognizes compensation expense on a straight-line basis over the total requisite service period for the entire award.

awards classified as equity the market price of our common stock or Preferred Stock on the date of grant is used in recording

the fair value of the award.

For stock awards classified as a liability, the earned amount is marked to market based on the end

of period common stock price.

The weighted average grant date fair value of the common stock price in connection with the RSUs

classified as equity was $4.87 and $4.53 for the years ended December 31, 2019 and 2018, respectively.

The weighted average grant

date fair value of the Preferred Stock in connection with the RSUs was $26.77 and $25.00 for the years ended December 31, 2019

Company recognizes compensation expense on a straight-line basis over the total requisite service period for the entire award.

For stock awards classified as equity the market price of our common stock or Preferred Stock on the date of grant is used in

recording the fair value of the award.

For stock awards classified as a liability, the earned amount is marked to market based

on the end of period common stock price.

The weighted average grant date fair value of the common stock price in connection with

the RSUs classified as equity was $6.20 and $4.87 for the years ended December 31, 2020 and 2019, respectively.

The weighted average

grant date fair value of the Preferred Stock in connection with the RSUs was $27.06 and $26.77 for the years ended December 31,

2020 and 2019, respectively.

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Stock-based compensation included in the

Year ended December 31,

consolidated statements of operations:

($ in thousands)

Direct operating costs

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Total stock-based compensation expense

For the years

ended December 31, 2019 and 2018, the Company estimated its income tax provision based upon the annual pre-tax loss.

the Company is forecasting a return to profitability, it incurred cumulative 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 all federal and

state deferred tax assets as of December 31, 2019 and December 31, 2018, with the exception of a net deferred tax liability relating

to the amortization of intangibles for tax purposes.

As of January

1, 2018, all adjusted foreign income amounts became taxable due to a change in U.S.

tax law under the recent tax reform legislation

discussed below.

For state tax purposes, the Company’s foreign earnings may be taxable depending on each individual state’s

legislative stance on the recent tax reform legislation.

The activity in the deferred tax valuation allowance was as follows for

the years ended December 31, 2019 and 2018:

the years ended December 31, 2020 and 2019, the Company estimated its income tax provision based upon the annual pre-tax loss.

Although the Company is forecasting a return to profitability, it incurred cumulative 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 all federal

and state deferred tax assets as of December 31, 2020 and December 31, 2019, with the exception of a net deferred tax liability

relating to the amortization of intangibles for tax purposes.

of December 31, 2017, the accumulated undistributed earnings and profits (“E&P”) of our foreign affiliates became

taxable in the U.S.

under Section 965.

This accumulated foreign E&P was absorbed against our U.S.

net operating losses and,

hence, no transition tax was paid.

From January 1, 2018 forward, the annual adjusted earnings and profits of our foreign affiliates

pass through to the U.S.

as federal and state taxable income under the Global Intangible Low-Taxed Income (“GILTI”)

regime - passed as part of the 2017 Tax Cuts & Jobs Act.

For the tax years ended December 31, 2020 and 2019, the net GILTI

from our foreign affiliates was absorbed against our current year U.S.

consolidated loss.

For state tax purposes, the Company’s

foreign earnings may be taxable depending on each individual state’s legislative stance on the recent tax reform legislation.

The activity in the deferred tax valuation allowance was as follows for the years ended December 31, 2020 and 2019:

Year ended December 31,

($ in thousands)

Beginning balance

Impact of acquisitions

Adjustments/true-ups

Ending balance

The adjustments/true-ups

for 2019 primarily represent the deferred tax effect of the Company’s adoption of ASC 606.

The adjustments/true-ups for

2018 primarily represent the use of federal net operating losses to offset the Transition Tax as defined below.

Accordingly, additional

valuation allowances needed to be provided.

Since a full valuation allowance is recorded on the Company’s deferred tax assets,

there was no effect on the Company’s consolidated balance sheet.

The loss before

tax for financial reporting purposes during the years ended December 31, 2019 and 2018 consisted of the following:

adjustments/true-ups for 2019 primarily represent the deferred tax effect of the Company’s adoption of ASC 606.

additional valuation allowances needed to be provided.

Since a full valuation allowance is recorded on the Company’s deferred

tax assets, there was no effect on the Company’s consolidated balance sheet.

loss before tax for financial reporting purposes during the years ended December 31, 2020 and 2019 consisted of the following:

Year ended December 31,

($ in thousands)

United States

$ (1,154,831 )

$ (4,111,539 )

$ (2,295,865 )

The provision

(benefit) for income taxes for the years ended December 31, 2019 and 2018 consisted of the following:

provision for income taxes for the years ended December 31, 2020 and 2019 consisted of the following:

Year ended December 31,

Total income tax provision (benefit)

The components

of the Company’s deferred income taxes as of December 31, 2019 and 2018 are as follows:

December 31, 2019

December 31, 2018

($ in thousands)

Total income tax provision

components of the Company’s deferred income taxes as of December 31, 2020 and 2019 are as follows:

($ in thousands)

Deferred tax assets:

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Deferred revenue

Deferred rent

Property and intangible assets

6 unchanged sentences

ASC 842 - ROU asset

Prepaid commissions

Section 267 limitation

Deferred payroll taxes

Credit carryovers

ASC 842 - Lease liability

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Net deferred tax liability

Deferred income

tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax

bases, as well as from net operating loss carryforwards.

Deferred income tax assets represent amounts available to reduce income

taxes payable on taxable income in future years.

has recorded goodwill as a result of its acquisitions.

income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their

tax bases, as well as from net operating loss carryforwards.

Deferred income tax assets represent amounts available to reduce

income taxes payable on taxable income in future years.

Company has recorded goodwill as a result of its acquisitions.

Goodwill is generally not amortized for financial reporting purposes.

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

As such, deferred income tax expense and a deferred tax

liability arise as a result of the tax-deductibility of this indefinitely lived asset (also known as a naked credit).

The resulting

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

As a result of the Company incurring a tax loss for 2018 which has an indefinite life under the recent tax reform legislation,

the federal deferred tax liability resulting from the amortization of goodwill was offset against the 2019 federal operating net

loss, to the extent allowable.

This resulted in a deferred tax benefit of approximately $208,000 in 2018.

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 business is sold.

Due to the fact

that the aforementioned deferred tax liability could have an indefinite life, it is not netted against the Company’s deferred

tax assets when determining the required valuation allowance in accordance with ASC 740 guidelines.

Doing so would result in the

understatement of the valuation allowance and related deferred income tax expense.

A reconciliation

of the federal statutory income tax rate (21%) for 2019 and 2018 to the Company’s effective income tax rate (determined

in dollars) for the years ended December 31, 2019 and 2018 is as follows:

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

As such, deferred income tax

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

a naked credit).

The resulting deferred tax liability, which is expected to continue to increase 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.

This resulted in a deferred tax

benefit of approximately $84,000 in 2020.

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 business

to the fact that the aforementioned deferred tax liability could have an indefinite life, it is not netted against the Company’s

deferred tax assets when determining the required valuation allowance in accordance with ASC 740 guidelines.

Doing so would result

in the understatement of the valuation allowance and related deferred income tax expense.

reconciliation of the federal statutory income tax rate (21%) for 2020 and 2019 to the Company’s effective income tax rate

(determined in dollars) for the years ended December 31, 2020 and 2019 is as follows:

Year ended December 31,

($ in thousands)

Federal benefit at statutory rate

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Subpart F GILTI inclusion

Stock based compensation

Change in contingent consideration

Deferred true-up

Valuation allowance

Additional tax goodwill/contingent consideration

Total income tax provision (benefit)

31, 2019 and 2018, the Company did not record any uncertain tax positions based on the technical merits.

Therefore, a tabular

roll forward was excluded and there has been no accrued interest and penalties.

The Company is subject to taxation in the United

States, various states, Pakistan and Sri Lanka.

As of December 31, 2019, tax years 2016 through 2018 remain open to examination

in the United States by major taxing jurisdictions in which the Company is subject to tax.

The Pakistan Federal Board of Revenue

issued a tax holiday, which precludes the Pakistan subsidiary from being subject to income taxes through June 2025.

Company’s policy that any assessed penalties and interest on uncertain tax positions would be charged to income tax expense.

tax holiday does not have a significant impact on the Company’s effective tax rate as all of its earnings in Pakistan have

been fully included in the U.S.

Total income tax provision

December 31, 2020 and 2019, the Company did not record any uncertain tax positions based on the technical merits.

tabular roll forward was excluded and there has been no accrued interest and penalties.

The Company is subject to taxation in

the United States, various states, Pakistan and Sri Lanka.

As of December 31, 2020, tax years 2017 through 2019 remain open to

examination in the United States by major taxing jurisdictions in which the Company is subject to tax.

The Pakistan Federal Board

of Revenue issued a tax holiday, which precludes the Pakistan subsidiary from being subject to income taxes through June 2025.

It is the Company’s policy that any assessed penalties and interest on uncertain tax positions would be charged to income

Pakistan tax holiday does not have a significant impact on the Company’s effective tax rate as all of its earnings in Pakistan

have been fully included in the U.S.

federal tax rate of 21% for 2020 and 2019.

The Pakistan statutory corporate tax rate is 29% before

consideration of the aforementioned tax holiday.

has a federal NOL carry forward of approximately $19.8 million of which approximately $15.8 million will expire between 2034 and

2037 and $4.0 million has an indefinite life.

The Company has state NOL carry forwards which mainly consists of approximately

$38.5 million, of which $17.9 million relates to the State of New Jersey.

These NOLs expire between 2034 to 2039.

has a full valuation allowance on its deferred tax assets in the U.S.

The Pakistan statutory corporate tax rate is 29%

before consideration of the aforementioned tax holiday.

As 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.

Company has a full valuation allowance on its deferred tax assets in the U.S.

which results in there being no U.S.

deferred tax assets

or liabilities recorded on the consolidated balances sheet.

Other than the deferred tax liability related to the amortization

(EXPENSE) INCOME –

Other (expense)

income - net for the years ended December 31, 2019 and 2018 consisted of the following:

assets or liabilities recorded on the consolidated balances sheet, other than the deferred tax liability related to the amortization

Appropriations Act was signed into law on December 27, 2020 and contains many tax-related provisions.

Some of the more notable

provisions are (1) clarifying the tax treatment of expenses paid with Paycheck Protection Program (PPP) loan proceeds, (2) temporarily

providing for a 100% deduction of business meal expenses, (3) modifying the Employee Retention Tax Credit previously enacted under

the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), (4) extending the repayment period of certain deferred payroll

taxes, and (5) extending the tax credits available to employers under the Families First Coronavirus Response Act (FFCRA) and

Section 45S of the Internal Revenue Code of 1986, as amended (the Code) for employer-paid family and medical leave.

believes these new provisions will not have a significant impact on the consolidated financial statements.

OTHER (EXPENSE) INCOME –

income (expense) - net for the years ended December 31, 2020 and 2019 consisted of the following:

Year Ended December 31,

Foreign exchange (loss) gain

Other (expense) income - net

($ in thousands)

Foreign exchange gain (loss)

Other (expense) income

Other income (expense) - net

currency transaction gains and losses primarily result from transactions in foreign currencies other than the functional currency.

1 unchanged sentence

and settlement of such transactions.

Both our Chief

Executive Officer and Executive Chairman serve as the CODM, organize the Company, manage resource allocations and measure performance

among two operating and reportable segments:

segment reporting

our Chief Executive Officer and Executive Chairman serve as the CODM, organize the Company, manage resource allocations and measure

performance among two operating and reportable segments:

(i) Healthcare IT and (ii) Practice Management.

11 unchanged sentences

Year Ended December 31, 2020

($ in thousands)

Healthcare IT

Practice Management

Unallocated Corporate

Operating expenses:

5 unchanged sentences

Depreciation and amortization

Restructuring and impairment charges

Impairment and unoccupied lease charges

Total operating expenses

Operating income (loss)

$ (4,721,004 )

Operating (loss) income

Year Ended December 31, 2019

($ in thousands)

Healthcare IT

Practice Management

Unallocated Corporate

Operating expenses:

5 unchanged sentences

Depreciation and amortization

Restructuring and impairment charges

Total operating expenses

Operating income (loss)

$ (5,265,219 )

$ (2,539,817 )

VALUE OF FINANCIAL INSTRUMENTS

As of December

31, 2019, and December 31, 2018, the carrying amounts of accounts receivable, accounts payable and accrued expenses approximated

their estimated fair values because of the short term nature of these financial instruments.

measurements-Level 2

Our notes payable

are carried at cost and approximate fair value since the interest rates being charged approximate market rates.

As a result, the

Company categorizes these borrowings as Level 2 in the fair value hierarchy.

FAIR VALUE OF FINANCIAL INSTRUMENTS

of December 31, 2020, and December 31, 2019, the carrying amounts of accounts receivable, accounts payable and accrued expenses

approximated their estimated fair values because of the short term nature of these financial instruments.

Value Measurements-Level 2

notes payable are carried at cost and approximate fair value since the interest rates being charged approximate market rates.

As a result, the Company categorizes these borrowings as Level 2 in the fair value hierarchy.

Consideration

The Company’s

contingent consideration of approximately $526,000 as of December 31, 2018, is a Level 3 liability.

The fair value of the contingent

consideration at December 31, 2018 was primarily driven by changes in revenue estimates related to the acquisitions during 2015

and 2016, the passage of time and the associated discount rate.

Due to the number of factors used to determine contingent consideration,

it was not possible to determine a range of outcomes.

During 2019, the contingent consideration liability was fully settled.

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 Measurement at Reporting Date

Using Significant

Company’s contingent consideration is a Level 3 liability.

The fair value of the contingent consideration is primarily driven

by changes in revenue estimates related to the acquisitions, the passage of time and the associated discount rate.

2020 and 2019, the contingent consideration liability was fully settled.

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 Measurement at Reporting Date Using Significant

Unobservable Inputs, Level 3

Year ended December 31,

($ in thousands)

Balance - January 1,

1 unchanged sentence

Balance - December 31,

On January 8,

2020, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CareCloud Corporation,

a Delaware corporation (“CareCloud”), MTBC Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of

the Company (“Merger Sub”) and Runway Growth Credit Fund Inc.

(“Runway”), solely in its capacity as a

seller representative, pursuant to which Merger Sub merged with and into CareCloud (the “Merger”), with CareCloud

surviving as a wholly-owned subsidiary of the Company.

The Merger became effective simultaneously with the execution of the Merger

CareCloud was the surviving corporation of the Merger and became a wholly-owned subsidiary of the Company.

The total consideration

for the Merger paid at closing was $11.9 million in cash, the assumption of a working capital deficiency of approximately $5.1

million and 760,000 shares of the Company’s Preferred Stock.

The Merger Agreement provides that if CareCloud’s 2020

revenues exceed $36 million, there will be an earn-out payment to the seller equal to such excess, up to $3 million.

consideration included warrants to purchase 2,000,000 shares of the Company’s common stock, 1,000,000 of which have an exercise

price per share of $7.50 and a term of two years, and the other 1,000,000 warrants have an exercise price per share of $10.00

and a term of three years.

Of the Preferred

Stock consideration, 160,000 shares will be held in escrow for up to 24 months, and an additional 100,000 shares will be held

in escrow for up to 18 months, in both cases, to satisfy indemnification obligations of the seller for losses arising from certain

specified contingent liabilities.

Shares net of such losses will be released upon joint instruction of the Company and Runway

in accordance with the applicable escrow terms.

The Company’s

Preferred Stock and warrants being issued as part of the Merger consideration were issued in a transaction exempt from registration

under the Securities Act of 1933, as amended (the “Securities Act”).

The Company has agreed that, as soon as practicable

after the completion of CareCloud’s 2019 financial statements audit, the Company will register for resale under the Securities

Act the Preferred Stock and the securities underlying the warrants.

SUBSEQUENT EVENTS

January 1, 2021, MHI and MED were merged into MTBC, and MBM was merged into Origin Holdings, Inc.

Accordingly, MHI, MED and MBM

no longer exist as of that date.

Simultaneously with the merger, the name of Origin Holdings, Inc.

was changed to Meridian Medical

Management, Inc.

The Company entered into a lease in

Ohio for a newly built 8,000 square feet pediatric office in February 2021 with a lease term of 15 years.

Also, in February 2021,

the Company was able to settle one of the lease obligations assumed in connection with the Meridian acquisition for an amount that

approximated the remaining lease liability.

Additionally, in February 2021, the

Company’s Board of Directors approved changing the name of the Company to CareCloud, Inc.

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 9A. Controls and Procedures