What changed in this filing

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Item 9A. Controls and Procedures

2023-03-02 compared with 2022-03-14 · 1103 added, 1298 removed, 785 unchanged (75% of the section changed)

15 unchanged sentences

on the evaluation of our disclosure controls and procedures, as of December 31, 2022, our Chief Executive Officer and Chief Financial

Officer concluded that, as of such date, our disclosure controls and procedures were not effective due to the material weakness in our

internal control over financial reporting described below.

However, our management, including our Chief Executive Officer and Chief Financial

Officer, has concluded that, notwithstanding the identified material weakness in our internal control over financial reporting, the consolidated

financial statements in this Annual report on Form 10-K fairly present, in all material respects, our consolidated financial condition,

results of operations and cash flows for the periods presented in accordance with U.S.

Officer concluded that, as of such date, our disclosure controls and procedures were effective.

Our management, including our Chief Executive

Officer and Chief Financial Officer, has concluded that the consolidated financial statements in this Annual Report on Form 10-K fairly

present, in all material respects, our consolidated financial condition, results of operations and cash flows for the periods presented

in accordance with U.S.

generally accepted accounting principles.

Additionally,

the identified material weakness did not result in any restatements of our previously filed consolidated financial statements or disclosures

for any period.

Report on Internal Control over Financial Reporting

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

Management excluded medSR from its assessment of internal controls over financial reporting,

our 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 2021, the revenue recorded by

the Company for medSR was approximately $15.9 million and the assets acquired were approximately

$21.1 million, including goodwill.

identified a material weakness in our internal control over financial reporting related to the proper implementation of controls

over the precision of management’s review of certain assumptions relating to a non-routine transaction.

weakness did not result in any identified misstatements to the financial statements as filed, and there were no changes to

previously released financial results.

However, based on this material weakness, our management concluded that as of December 31,

2021, the Company’s internal control over financial reporting was not effective.

has analyzed the material weakness described above and performed additional analysis and procedures in preparing our consolidated financial

We have concluded that our consolidated financial statements fairly present, in all material respects, our financial condition,

results of operations and cash flows at and for the periods presented.

Our management concluded that as of December

31, 2022, the Company’s internal control over financial reporting was effective.

has performed analysis and procedures in preparing our consolidated financial statements.

We have concluded that our consolidated financial

statements fairly present, in all material respects, our financial condition, results of operations and cash flows at and for the periods

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.

Thornton, LLP, an independent registered public accounting firm, has audited the consolidated financial statements included in this Annual

Report on Form 10-K and, as part of their audit, has issued their attestation report, included herein, on the effectiveness of our internal

control over financial reporting.

Plan for Existing Material Weakness

management is committed to remediation of the material weakness described above.

The material weakness was due to a lack of controls

over the completeness and accuracy of key inputs related to the measurement of a non-routine transaction.

Controls will be added to

increase the precision of review of the key inputs used for such transactions.

It is our belief that these added controls will

effectively remediate the existing material weakness.

The material weakness will not be considered remediated, however, until the

controls are designed, implemented, and operate for a sufficient period of time and management has concluded, through testing, that

these controls are operating effectively.

We expect that the remediation of this material weakness will be completed prior to the

statements and notes 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.

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

over financial reporting.

Management’s report was not subject to attestation by the Company’s registered public accounting

firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this Annual Report on Form

in Internal Control over Financial Reporting

are taking actions to remediate the material weakness relating to our internal control over financial reporting, as described above.

Except as otherwise described herein, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)

of the Exchange Act) during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

the period January 1, 2022 through December 31, 2022, we implemented and tested changes to our internal control over financial reporting

related to our remediation efforts described below.

During the fourth quarter of 2022, there were no changes

in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that have materially affected, or

are reasonably likely to materially affect, our internal control over financial reporting.

of a Material Weakness in Internal Control Over Financial Reporting

the year ended December 31, 2021, we concluded that we had a material weakness in internal control over financial reporting, specifically

related to the completeness and accuracy of key inputs related to non-routine transactions as described in Item 9A of our Annual Report

on Form 10-K for the fiscal year ended December 31, 2021.

To address the material weakness, during the year ended December 31, 2022,

we designed and implemented enhancements to our processes and controls to verify the completeness and accuracy of key inputs related

to non-routine transactions by requiring more detailed reviews by experienced staff and increased communication among our personnel and

third party professionals with whom we consult regarding such transactions.

Based on the cumulative changes implemented, as well as management’s

evaluation of the design and operating effectiveness of the new controls, management has concluded that the material weakness, related

to the completeness and accuracy of key inputs related to non-routine transactions has been remediated as of December 31, 2022.

Other Information

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(iii) Consolidated

Statements of Comprehensive Income (Loss) for the years ended December 31, 2021 and 2020

Statements of Comprehensive Income for the years ended December 31, 2022 and 2021

(iv) Consolidated

2 unchanged sentences

Statements of Cash Flows for the years ended December 31, 2022 and 2021

to Consolidated Financial Statements

(vi) Notes to Consolidated Financial Statements

(2) Financial

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

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

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).

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).

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).

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

and Stock Purchase Agreement by and among CareCloud Acquisition.

Corp., MedMatica Consulting Associates, Inc., and Jerold Howell

dated June 1, 2021 (filed as Exhibit 2.1 to the Company’s Form 8-K filed on June 2, 2021, and incorporated herein by

Non-Competition

and Non-Solicitation Agreement by and among Santa Rosa Consulting, Inc., SureTest Holdings, LLC, Laura O’Toole, Mark

Scruggs, Raleigh Brewer, Thomas Watford, and CareCloud Acquisition, Corp., dated June 1, 2021 (filed as Exhibit 2.2 to the Company’s

Form 8-K filed on June 2, 2021, and incorporated herein by reference).

Services Agreement by and among CareCloud Acquisition, Corp., MedMatica Consulting Associates, Inc., and Jerold Howell, dated June

1, 2021 (filed as Exhibit 2.3 to the Company’s Form 8-K filed on June 2, 2021 and incorporated herein by reference).

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).

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).

Asset and Stock Purchase Agreement by and among CareCloud Acquisition.

Corp., MedMatica Consulting Associates, Inc., and Jerold Howell dated June 1, 2021 (filed as Exhibit 2.1 to the Company’s Form 8-K filed on June 2, 2021, and incorporated herein by reference).

Non-Competition and Non-Solicitation Agreement by and among Santa Rosa Consulting, Inc., SureTest Holdings, LLC, Laura O’Toole, Mark Scruggs, Raleigh Brewer, Thomas Watford, and CareCloud Acquisition, Corp., dated June 1, 2021 (filed as Exhibit 2.2 to the Company’s Form 8-K filed on June 2, 2021, and incorporated herein by reference).

Transition Services Agreement by and among CareCloud Acquisition, Corp., MedMatica Consulting Associates, Inc., and Jerold Howell, dated June 1, 2021 (filed as Exhibit 2.3 to the Company’s Form 8-K filed on June 2, 2021 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).

of Amendment of Certificate of Incorporation of the Company dated June 28, 2016 (filed as

1 unchanged sentence

herein by reference).

of Amendment of Amended and Restated Certificate of Incorporation of the Company dated June 18, 2018 (filed as Exhibit 3.6 to the

Company’s Form S-1 filed on September 25, 2018 and incorporated herein by reference).

of Amendment of Amended and Restated Certificate of Incorporation of the Company dated February

6, 2019 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on February 7, 2019 and

incorporated herein by reference).

of Amendment of Amended and Restated Certificate of Incorporation of MTBC, Inc.

25, 2019 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on June 25, 2019 and

incorporated herein by reference).

and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock

dated July 6, 2016 (filed as Exhibit 3.3 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by

Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual

Preferred Stock dated September 15, 2017 (filed as Exhibit 3.4 to the Company’s Form S-1 filed on September 25, 2018, and incorporated

herein by reference).

Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company dated June 18, 2018 (filed as Exhibit 3.6 to the Company’s Form S-1 filed on September 25, 2018 and incorporated herein by reference).

Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company dated February 6, 2019 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on February 7, 2019 and incorporated herein by reference).

Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company dated June 25, 2019 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on June 25, 2019 and incorporated herein by reference).

Certificate of Amendment of Amended and Restated Certificate of Incorporation of the Company dated February 26, 2021 (filed as Exhibit 3.1 to the Company’s Form 8-K filed on March 29, 2021 and incorporated herein by reference).

Certificate of Amendment to Amended and Restated Certificate of Incorporation of the Company dated June 16, 2022 (filed as Exhibit 3.6 to the Company’s Form 8-K/A filed on June 17, 2022 and incorporated herein by reference).

Certificate of Correction to Certificate of Amendment to Amended and Restated Certificate of Incorporation (filed as Exhibit 3.1 to the Company’s Form 8-K/A filed June 17, 2022 and incorporated herein by reference).

Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated July 6, 2016 (filed as Exhibit 3.3 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference).

First Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated September 15, 2017 (filed as Exhibit 3.4 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference).

Second Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated March 23, 2018 (filed as Exhibit 3.5 to the Company’s Form S-1 filed on September 25, 2018, and incorporated herein by reference).

4 unchanged sentences

Seventh 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 January 31, 2022 and incorporated herein by reference).

Certificate of Correction to Eighth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock (filed as Exhibit 3.2 to the Company’s Form 8-K/A filed June 17, 2022 and incorporated herein by reference).

Eighth Amendment to Amended and Restated Certificate of Designations, Preferences and Rights of 11% Series A Cumulative Redeemable Perpetual Preferred Stock dated June 15, 2022 (filed as Exhibit 3.4 to the Company’s Form 8-K/A filed June 17, 2022 and incorporated herein by reference).

Certificate of Designations, Preferences and Rights of 8.75% Series B Cumulative Redeemable Perpetual Preferred Stock (filed as exhibit 3.2 to the Company’s Form 8-K filed January 31, 2022 and incorporated herein by reference).

Certificate of Correction to First Amendment to Certificate of Designations, Preferences and Rights of 8.75% Series B Cumulative Redeemable Perpetual Preferred Stock (filed as Exhibit 3.3 to the Company’s Form 8-K/A filed June 17, 2022 and incorporated herein by reference).

First Amendment to Certificate of Designations, Preferences and Rights of 8.75% Series B Cumulative Redeemable Perpetual Preferred Stock dated June 15, 2022 (filed as Exhibit 3.5 to the Company’s Form 8-K/A filed June 17, 2022 and incorporated herein by reference).

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

12 unchanged sentences

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 (filed as Exhibit 4.8 to the Company’s Form 10-K on February 25, 2021 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.

6 unchanged sentences

1 to the Company’s Form S-1 filed on April 7, 2014, and incorporated herein by reference).

Third Amendment to Amended and Restated Equity Incentive Plan (filed as Exhibit 3.1 to the Company’s Form 8-K filed on June 9, 2022, and incorporated herein by reference).

Form of Restricted Stock Award Agreement under the Amended and Restated Equity Incentive Plan (filed as Exhibit 10.12 to the Company’s Form 10-K filed on March 24, 2016, and incorporated herein by reference).

1 unchanged sentence

Employment Agreement between the Company and Mahmud Haq dated as of May 1, 2018 (filed as Exhibit 10.1 to the Company’s Form 8-K filed on May 7, 2018, and incorporated herein by reference).

Employment Agreement between the Company and Stephen Snyder dated as of March 23, 2021 (filed as Exhibit 10.1 to the Company’s Form 8-K filed on March 24, 2021, and incorporated herein by reference).

Employment Agreement between the Company and A.

11 unchanged sentences

Joinder and Fifth Loan Modification Agreement dated September 21, 2021, by and between the Company and SVB (filed as Exhibit 10.1 to the Company’s Form 8-K filed on September 22, 2021 and incorporated herein by reference).

Joinder and Sixth Loan modification Agreement dated January 27, 2022, by and between the Company and SVB.

Underwriting Agreement dated January 28, 2022 by and between the Company and B.

1 unchanged sentence

as representative of several underwriters named therein (filed as Exhibit 1.1 to the Company’s Form 8-K filed on January 31, 2022, and incorporated herein by reference).

Sixth Loan Modification Agreement dated January 27, 2022, by and between the Company and SVB (filed as Exhibit 10.19 to the Company’s Form 10-Q filed on May 9, 2022 and incorporated herein by reference).

At Market Issuance Sales Agreement dated February 14, 2022 by and between CareCloud, Inc.

Riley Securities, Inc.

(filed as Exhibit 1.1 to the Company’s Form 8-K filed on February 14, 2022 and incorporated herein by reference).

Seventh Loan Modification Agreement dated February 17, 2023, by and between the Company and SVB (filed as Exhibit 10.1 to the Company’s Form 8-K filed on February 21, 2023 and incorporated herein by reference).

Consulting Agreement dated June 3, 2022 by and between the Company and Hill City Advisors, LLC.

Amendment to Consulting Agreement dated February 16, 2023 by and between the Company and Hill City Advisors, LLC.

List of subsidiaries.

6 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Taxonomy Extension Schema

Taxonomy Extension Calculation Linkbase

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Taxonomy Extension Definition Linkbase

XBRL Instance

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

Indicates management contract or compensatory plan or arrangement.

certifications on Exhibit 32 hereto are deemed not “filed” for purposes of Section 18 of the Securities and Exchange

Act of 1934, as amended, or otherwise subject to the liability of that Section.

Such certifications will not be deemed incorporated

by reference into any filing under the Securities Act or the Exchange Act.

The certifications on Exhibit 32 hereto are deemed not “filed”

for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section.

Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed

3 unchanged sentences

Executive Officer

March 14, 2022

Financial Officer

March 14, 2022

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

6 unchanged sentences

Accounting Officer

Stephen Snyder

Lawrence Sharnak

Cameron Munter

Lawrence Sharnak

Stephen Snyder

to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm Grant Thornton, LLP (PCAOB

ID Number 248 )

Report of Independent Registered Public Accounting Firm Grant Thornton, LLP (PCAOB ID Number 248 )

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the years ended December 31, 2022 and 2021

Consolidated Statements of Comprehensive Income for the years ended December 31, 2022 and 2021

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Balance Sheets as of December 31, 2021 and 2020

Statements of Operations for the years ended December 31, 2021 and 2020

Statements of Comprehensive Income (Loss) for the years ended December 31, 2021 and 2020

Statements of Shareholders’ Equity for the years ended December 31, 2021 and 2020

Statements of Cash Flows for the years ended December 31, 2021 and 2020

to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

of Directors and Shareholders

Board of Directors and Shareholders

CareCloud, Inc.

on the financial statements

have audited the accompanying consolidated balance sheets of CareCloud, Inc.

(a Delaware corporation) and subsidiaries (the “Company”)

as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, changes in shareholders’

equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred

to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of

the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States

also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),

the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal

Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”),

and our report dated March 14, 2022 expressed an adverse opinion.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on 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.

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

Those standards require that we plan and perform the audit to obtain

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

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.

audit matters

critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements

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

(1) relate to accounts or disclosures that are

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

The communication

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

not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts

or disclosures to which it relates.

of certain intangible assets

described further in Note 3 to the consolidated financial statements, the Company completed the acquisition of Medmatica Consulting Associates,

(“medSR”), during the year ended December 31, 2021.

This transaction was accounted for as a business combination in

accordance with ASC 805, Business Combinations, which resulted in the identification and recognition of customer relationships (“the

identifiable intangible assets”).

The Company used a discounted cash flow model to measure the customer relationship intangible

We identified the valuation of the identifiable intangible assets associated with this acquisition as a critical audit matter.

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

the complexity and high degree of subjectivity associated with auditing the Company’s fair value of the 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, and customer attrition.

These significant assumptions are forward looking and consider anticipated market conditions, which in turn, requires subjective auditor

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

evaluated the design and tested the operating effectiveness of the Company’s controls over the valuation of the identifiable

intangible assets.

This included testing controls over the estimation process supporting the recognition and measurement of identified

intangible assets and contingent consideration, including management’s evaluation of underlying assumptions and estimates used

to determine the fair value.

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 assumed growth rates, discount rate, and customer attrition.

evaluated whether significant assumptions used, including assumed growth rates, discount rate, economic lives, and customer attrition,

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.

of contingent consideration

described further in Note 3 to the consolidated financial statements, the purchase price of medSR also included contingent consideration

that is fair valued as of the acquisition date based on certain profitability and revenue targets being achieved.

The Company performed

the initial valuation of the contingent consideration upon the acquisition date as well as performed a re-measurement of the contingent

consideration as of the December 31, 2021.

The Company used a Monte Carlo simulation model to estimate the fair value of the contingent

consideration earnout.

We identified the valuation of the contingent consideration as a critical audit matter.

principal considerations for our determination that the valuation of the initial measurement and subsequent re-measurement of contingent

consideration as a critical audit matter is the complexity and high degree of subjectivity associated with auditing the Company’s

fair value of the contingent consideration due to the complexity of the Monte Carlo simulation model and related assumptions used.

significant assumptions and estimates include the probability the Company will achieve a specified range

of revenue, profitability levels, and volatility.

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 contingent consideration included the following, among others:

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

valuation methodology and evaluating the reasonableness of certain significant assumptions used to estimate the fair value of the

contingent consideration, which include the probability the Company will achieve a specified range of revenue and profitability levels

and volatility.

evaluated whether assumptions used, including the probability the Company will achieve a specified range of revenue and profitability

levels, 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

We have audited the accompanying consolidated balance sheets of CareCloud, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

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.

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

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

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

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.

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 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

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.

Goodwill Impairment Assessment- Healthcare IT Reporting Unit

described further in Notes 2 and 4 of the consolidated financial statements, the Company performed a goodwill impairment assessment as

of October 31, 2022, the date of its annual impairment test, on one of its reporting units, Healthcare IT (HIT).

We identified the Company’s

goodwill impairment assessment over the HIT reporting unit as a critical audit matter.

The principal considerations for our determination that goodwill impairment assessment is a critical audit matter are the significant management estimates and judgements related to forecasts of expected future cash flows required to estimate the HIT reporting unit’s fair value.

Management’s significant estimates and judgements include the determination of the discount rate, revenue growth rates, operating margins, and long-term growth rate.

Auditing these estimates requires a high degree of auditor judgement, including the use of professionals with specialized skills and knowledge.

Our audit procedures related to the goodwill impairment assessment included the following, among others:

assessed the design and implementation of management controls around the determination of inputs used in the quantitative impairment test.

We assessed management’s ability to forecast by

comparing historical projections to actual results and comparing current forecasted projections to historical trends, industry data, and underlying business strategies.

evaluated managements revenue growth rates, operating margins, and cash flows for consistency with relevant historical data, recent

changes in the business, and external industry data and forecasts.

the assistance of our valuation professionals with specialized skills and knowledge, we evaluated the valuation methodologies, inputs,

and assumptions utilized by management, including the long-term growth rate and discount rate.

performed sensitivity analyses on the long-term growth rate and discount rate used to evaluate the impact that changes in these assumptions

have on management’s conclusion.

/s/ GRANT THORNTON LLP

have served as the Company’s auditor since 2015.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

of Directors and Shareholders

on internal control over financial reporting

have audited the internal control over financial reporting of CareCloud, Inc.

(a Delaware corporation) and subsidiaries (the “Company”)

as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee

of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, because of the effect of the material weakness

described in the following paragraphs on the achievement of the objectives of the control criteria, the Company has not maintained effective

internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated

Framework issued by COSO.

material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there

is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented

or detected on a timely basis.

The following material weakness has been identified and included in management’s assessment.

The material weakness was due to a lack of controls over the completeness

and accuracy of key inputs related to the measurement of a non-routine transaction.

also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),

the consolidated financial statements of the Company as of and for the year ended December 31, 2021.

The material weakness identified

above was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 consolidated financial

statements, and this report does not affect our report dated March 14, 2021which expressed an unqualified opinion on those financial

Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment

of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal

Control Over Financial Reporting (“Management’s Report”).

Our responsibility is to express an opinion on the Company’s

internal control over financial reporting based on our audit.

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.

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

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,

testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other

procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial

reporting of medSR, Inc.

(“medSR”), a wholly-owned subsidiary, whose financial statements reflect total assets and revenues

constituting $21.1 million and $15.9 million, respectively, of the related consolidated financial statement amounts as of and for the

year ended December 31, 2021.

As indicated in Management’s Report, medSR was acquired during 2021.

Management’s assertion

on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting

and limitations of internal control over financial reporting

company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability

of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in

accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance

with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection

of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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 or procedures may deteriorate.

GRANT THORNTON LLP

BALANCE SHEETS

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in thousands, except share and per share amounts)

receivable - net

assets - related party

expenses and other current assets

Current assets:

and equipment - net

lease right-of-use assets

AND SHAREHOLDERS’ EQUITY

lease liability (current portion)

revenue (current portion)

liability to related party

payroll taxes

payable (current portion)

consideration (current portion)

Consideration

Restricted cash

Accounts receivable - net

Contract asset

Current assets - related party

Prepaid expenses and other current assets

Total current assets

Property and equipment - net

Operating lease right-of-use assets

Intangible assets - net

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

under line of credit

payroll taxes

lease liability

tax liability

AND CONTINGENCIES (NOTE 11)

SHAREHOLDERS’

stock, $ 0.001 par value - authorized 7,000,000 shares at December 31, 2021 and December 31, 2020;

issued and outstanding 5,299,227

and 5,475,279 shares at December 31, 2021 and December 31, 2020, respectively

stock, $ 0.001 par value - authorized 29,000,000 shares at December 31, 2021 and December 31, 2020;

issued 15,657,641 and 14,121,044

shares at December 31, 2021 and December 31, 2020, respectively;

14,916,842 and 13,380,245 shares outstanding at December 31, 2021

and December 31, 2020, respectively

paid-in capital

other comprehensive loss

740,799 common shares held in treasury, at cost at December 31, 2021 and December 31, 2020

Accounts payable

Accrued compensation

Accrued expenses

Operating lease liability (current portion)

Deferred revenue (current portion)

Deferred payroll taxes

Notes payable (current portion)

Contingent consideration (current portion)

Dividend payable

Consideration payable

Total current liabilities

Notes payable

Borrowings under line of credit

Operating lease liability

Deferred revenue

Deferred tax liability

Total liabilities

COMMITMENTS AND CONTINGENCIES (NOTE 11)

SHAREHOLDERS’ EQUITY:

LIABILITIES AND SHAREHOLDERS’ EQUITY

Preferred stock, $ 0.001 par value - authorized 7,000,000 shares.

Series A, issued and outstanding 4,526,231 and 5,299,227 shares at December 31, 2022 and December 31, 2021, respectively.

Series B, issued and outstanding 1,344,128 shares at December 31, 2022

Common stock, $ 0.001 par value - authorized 35,000,000 shares.

Issued 15,970,204 and 15,657,641 shares at December 31, 2022 and December 31, 2021, respectively.

Outstanding 15,229,405 and 14,916,842 shares at December 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive loss

740,799 common shares held in treasury, at cost at December 31, 2022 and December 31, 2021

Total shareholders’ equity

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

notes to consolidated financial statements.

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in thousands, except share and per share amounts)

operating costs

and marketing

and administrative

and development

in contingent consideration

and amortization

on lease termination, impairment and unoccupied lease charges

OPERATING EXPENSES:

INCOME (LOSS)

(expense) income - net

(LOSS) BEFORE PROVISION FOR INCOME TAXES

tax provision

INCOME (LOSS)

stock dividend

LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

loss per common share:

Direct operating costs

Selling and marketing

General and administrative

Research and development

Change in contingent consideration

Depreciation and amortization

Net loss on lease termination, impairment and unoccupied lease charges

Total operating expenses

OPERATING INCOME

OPERATING INCOME (LOSS)

Interest income

Interest expense

Other expense - net

INCOME BEFORE PROVISION FOR INCOME TAXES

Income tax provision

Preferred stock dividend

NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS

Net loss per common share:

basic and diluted

Weighted-average

common shares used to compute basic and diluted loss per share

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

notes to consolidated financial statements.

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

STATEMENTS OF COMPREHENSIVE INCOME

THE YEARS ENDED DECEMBER 31, 2022 AND 2021

in thousands)

INCOME (LOSS)

COMPREHENSIVE LOSS, NET OF TAX

currency translation adjustment (a)

COMPREHENSIVE

INCOME (LOSS)

OTHER COMPREHENSIVE LOSS, NET OF TAX

Foreign currency translation adjustment (a) (a)

COMPREHENSIVE INCOME

tax effect has been recorded as the Company recorded a valuation allowance against the tax benefit from its foreign currency translation

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in thousands, except for number of shares)

Other Comprehensive

Treasury (Common)

Preferred Stock Series A

Preferred Stock Series B

Additional Paid-in

Accumulated Other

Comprehensive

Shareholders’

- January 1, 2020

currency translation adjustment

of stock under the equity incentive plan

of shares held in escrow

of shares held in escrow , shares

of contingent liability

of common stock

of common stock , shares

of preferred stock, net of fees and expenses

of preferred stock in connection with the CareCloud and Meridian acquisitions

of warrants in connection with the CareCloud and Meridian acquisitions

of common stock warrants

compensation, net of cash settlements

withholding obligations on stock issued to employees

stock dividends

- December 31, 2020

- January 1, 2021

income (loss)

currency translation adjustment

of stock under the equity incentive plan

of shares held in escrow

of contingent liability

of common stock

of common stock warrants

compensation, net of cash settlements

stock dividends

- December 31, 2021

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

Balance - January 1, 2022

Foreign currency translation adjustment

Issuance of stock under the equity incentive plan

Redemption of Series A Preferred Stock

Exercise of common stock warrants

Issuance of Series B Preferred Stock

Stock issuance costs

Stock-based compensation, net of cash settlements

Preferred stock dividends

Balance - December 31, 2022

Balance - January 1, 2021

Foreign currency translation adjustment

Issuance of stock under the equity incentive plan

Cancellation of shares held in escrow

Settlement of contingent liability

Sale of common stock

Exercise of common stock warrants

Stock-based compensation, net of cash settlements

Preferred stock dividends

Balance - December 31, 2021

all years presented, the preferred stock dividends were paid monthly at the rate of $2.75 and $2.19 for Series A and Series B, respectively,

per share per annum.

notes to consolidated financial statements.

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in thousands)

income (loss)

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

and amortization

for doubtful accounts

(benefit) for deferred income taxes

exchange gain

(Gain) on sale of assets

compensation expense

in contingent consideration

in operating assets and liabilities, net of businesses acquired:

payable and other liabilities

cash provided by (used in) operating activities

of property and equipment

paid for acquisitions (net)

cash used in investing activities

stock dividends paid

of tax withholding obligations on stock issued to employees

of notes payable, net

from exercise of warrants

from issuance of common stock, net of expenses

from line of credit

of contingent obligation

from issuance of preferred stock, net of expenses

cash (used in) provided by financing activities

OF EXCHANGE RATE CHANGES ON CASH

(DECREASE) INCREASE IN CASH

- beginning of the period

AND RESTRICTED CASH - end of the year

NONCASH INVESTING AND FINANCING ACTIVITIES:

stock (cancelled) issued in connection with an acquisition

consideration at fair value at acquisition date

financing obtained

declared, not paid

of prepaid insurance with assumption of note

recorded as indemnification asset and offsetting accrual

INFORMATION - Cash paid during the year for:

OPERATING ACTIVITIES:

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

Depreciation and amortization

Lease amortization

Deferred revenue

Provision for doubtful accounts

Provision for deferred income taxes

Foreign exchange loss (gain)

Interest accretion

Loss on sale of assets

Stock-based compensation expense

Change in contingent consideration

Adjustment of goodwill

Changes in operating assets and liabilities, net of businesses acquired:

Accounts receivable

Contract asset

Accounts payable and other liabilities

Net cash provided by operating activities

INVESTING ACTIVITIES:

Purchases of property and equipment

Capitalized software

Cash paid for acquisition (net)

Net cash used in investing activities

FINANCING ACTIVITIES:

Preferred stock dividends paid

Settlement of contingent obligation

Settlement of tax withholding obligations on stock issued to employees

Repayments of notes payable

Financing and stock issuance costs

Proceeds from exercise of warrants

Proceeds from issuance of Series B Preferred Stock, net of expenses

Proceeds from issuance of common stock, net of expenses

Redemption of Series A Preferred Stock

Proceeds from line of credit

Repayment of line of credit

Net cash used in financing activities

EFFECT OF EXCHANGE RATE CHANGES ON CASH

NET INCREASE (DECREASE) IN CASH AND RESTRICTED CASH

CASH AND RESTRICTED CASH - Beginning of the year

CASH AND RESTRICTED CASH - End of the year

SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:

Preferred stock cancelled in connection with an acquisition

Contingent consideration at fair value at acquisition date

Dividends declared, not paid

Purchase of prepaid insurance with assumption of note

SUPPLEMENTAL INFORMATION - Cash paid during the year for:

notes to consolidated financial statements.

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ORGANIZATION AND BUSINESS

Inc., formerly MTBC, Inc.

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

“us” and/or “our”) is a healthcare information technology company that provides a full suite of proprietary cloud-based

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

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.

Our Software-as-a-Service (“SaaS”) platform includes revenue cycle

management (“RCM”), practice management (“PM”), electronic health record (“EHR”), business intelligence,

telehealth, patient experience management (“PXM”) solutions and complementary software tools and business services for high-performance

Inc., (together with its consolidated subsidiaries, “CareCloud,” the “Company,” “we,” “us”

and/or “our”) is a healthcare information technology company that provides a full suite of proprietary cloud-based solutions,

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

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.

Our Software-as-a-Service (“SaaS”) platform includes revenue cycle management

(“RCM”), practice management (“PM”), electronic health records (“EHR”), business intelligence, telehealth,

patient experience management (“PXM”) solutions and complementary software tools and business services for high-performance

medical groups and health systems.

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and incorporated under the laws of the State of Delaware in 2001.

In 2004, the Company formed MTBC Private Limited (or “MTBC Pvt.

Ltd.”), a 99.9 %

majority-owned subsidiary of CareCloud based in Pakistan.

The remaining 0.1 %

of the shares of MTBC Pvt.

by the founder and Executive Chairman of CareCloud.

In 2004, the Company formed MTBC Private Limited (“MTBC Pvt.

Ltd.”), a 99.9 % majority-owned subsidiary of CareCloud based

The remaining 0.1 % of the shares of MTBC Pvt.

is equally owned by the founder and Executive Chairman of CareCloud and

a local employee who is also a director of this entity.

In 2016, the Company formed MTBC Acquisition Corp.

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(collectively “Meridian” and sometimes referred to as “Meridian Medical Management”).

Both companies were subsequently

merged and the surviving company was renamed Meridian Medical Management, Inc.

March 2021, the Company formed a new wholly-owned subsidiary, CareCloud Acquisition, Corp.

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certain assets and assumed certain liabilities of MedMatica Consulting Associates Inc., (“MedMatica”) and purchased the stock

of Santa Rosa Staffing, Inc., (“SRS”).

of Santa Rosa Staffing, Inc.

The assets and liabilities of MedMatica were merged into SRS and the company was renamed

April 1, 2022, the Company formed MTBC Bagh Private Limited (“MTBC Bagh Pvt.

Ltd.”), a 99.8 % majority-owned subsidiary of

CareCloud based in Azad Jammu and Kashmir, a region administered by Pakistan.

The remaining 0.2 % of the shares of MTBC Bagh Pvt.

is equally owned by the founder and Executive Chairman of CareCloud and the same director/employee as noted above.

SIGNIFICANT ACCOUNTING POLICIES

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

CareCloud, its wholly-owned subsidiaries;

MAC, CPM, its majority-owned subsidiary MTBC Pvt.

Ltd, CCH (since January 2020), Meridian Medical

Management (since June 2020), medSR (since June 2021) and the subsidiary in Sri Lanka.

The non-controlling interest of MTBC Pvt.

is inconsequential to the consolidated financial statements.

CareCloud, its wholly-owned subsidiaries, MAC, CPM, its majority-owned subsidiary MTBC Pvt.

Ltd, majority-owned subsidiary MTBC Bagh

Ltd, CCH (since January 2020), Meridian Medical Management (since June 2020), medSR (since June 2021) and the subsidiary in Sri

The non-controlling interests of MTBC Pvt.

and MTBC Bagh Pvt.

are inconsequential to the consolidated financial statements.

All intercompany accounts and transactions have been eliminated in consolidation.

Reporting — The Company views its operations as comprising two operating segments, Healthcare IT and Practice Management.

chief operating decision maker (“CODM”) monitors and reviews financial information at these segment levels for assessing

Reporting — The Company views its operations as comprising two operating segments, Healthcare IT and Medical Practice Management.

The chief operating decision maker (“CODM”) monitors and reviews financial information at these segment levels for assessing

operating results and the allocation of resources.

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Actual results could significantly differ from those estimates.

Recognition — We derive revenue from five

primary sources:

(1) technology-enabled business solutions, (2) professional services, (3) printing and mailing services, (4) group purchasing

services and (5) medical practice management services.

Recognition — We derive revenue from five primary sources:

(1) technology-enabled business solutions including revenue cycle

management, (2) professional services, (3) printing and mailing services, (4) group purchasing services and (5) medical practice management

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

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 prices for

each service at its stand-alone selling price.

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 prices for each service at its stand-alone selling

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

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market research, analyzing proposed products and developing new products.

Software Costs — The Company capitalizes certain

development costs incurred in connection with its internal-use software.

Costs incurred in the preliminary stages of development are

expensed as incurred.

Once an application has reached the development stage, internal and external costs, if direct, are capitalized

until the software is substantially complete and ready for its intended use.

Capitalization ceases upon completion of all substantial

The Company also capitalizes costs related to specific upgrades and enhancements when it is probable that the expenditures will

result in additional functionality.

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

Software Costs — The Company capitalizes certain development costs incurred in connection with its internal-use software.

incurred in the preliminary stages of development are expensed as incurred.

Once an application has reached the development stage, internal

and external costs, if direct, are capitalized until the software is substantially complete and ready for its intended use.

Capitalization

ceases upon completion of all substantial testing.

The Company also capitalizes costs related to specific upgrades and enhancements when

it is probable that the expenditures will result in additional functionality.

Capitalized 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 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, 2021 and 2020, the Company capitalized approximately $ 7.6

million and $ 5.2

million, respectively, primarily consisting of

salaries and payroll-related costs of employees and consultants who devoted time to the development of internal-use software projects.

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, 2022 and 2021, the Company capitalized approximately $ 9.2 million and $ 7.6 million,

respectively, primarily consisting of salaries and payroll-related costs of employees and consultants who devoted time to the development

of internal-use software projects.

Receivable — Accounts receivable are stated at their net realizable value.

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movement in the allowance for doubtful accounts for the years ended December 31, 2022 and 2021 was as follows:

SCHEDULE OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

ended December 31,

OF ALLOWANCE FOR DOUBTFUL ACCOUNTS

Year Ended December 31,

($ in thousands)

and Equipment — Property and equipment are

stated at cost, less accumulated depreciation.

Depreciation is calculated using the straight-line basis over the estimated useful lives

of the assets ranging from three to five years.

Ordinary maintenance and repairs are expensed as incurred.

Depreciation for computers

is calculated over three years, while the remaining assets (except leasehold improvements) are depreciated over five years.

Company amortizes leasehold improvements over the lesser of the lease term or the remaining economic life of those assets.

the lease term is the base lease term plus certain renewal option periods for which renewal is reasonably certain and for which failure

to exercise the renewal option would result in an economic penalty to the Company.

Beginning balance

Recoveries/adjustments

Ending balance

and Equipment — Property and equipment are stated at cost, less accumulated depreciation.

Depreciation is calculated using

the straight-line basis over the estimated useful lives of the assets ranging from three to five years.

Ordinary maintenance and repairs

are expensed as incurred.

Depreciation for computers is calculated over three years, while the remaining assets (except leasehold improvements)

are depreciated over five years.

The Company amortizes leasehold improvements over the lesser of the lease term or the remaining economic

life of those assets.

Generally, the lease term is the base lease term plus certain renewal option periods for which renewal is reasonably

certain and for which failure to exercise the renewal option would result in an economic penalty to the Company.

Assets — Intangible assets include customer relationships, covenants not-to-compete acquired in connection with acquisitions,

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Amortization for intangible assets related

to the group purchasing organization and practice management is recorded on a straight line basis over four and twelve years, respectively.

to the group purchasing organization and medical practice management is recorded on a straight line basis over four and twelve years,

respectively.

of Long-Lived Assets — The Company reviews its long-lived assets for impairment whenever changes in circumstances indicate

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was no impairment of internal-use software costs, intangible assets or property and equipment during the years ended December 31, 2022

and 2020, other than the impairment recorded on right-of-use (“ROU”) assets of approximately $ 68,000 and $ 298,000 for the

years ended December 31, 2021 and 2020, respectively.

In addition, during the year ended December 31, 2021 the Company recorded approximately

$ 774,000 of impairment charges on a vendor contract.

and 2021, other than the impairment recorded on right-of-use (“ROU”) assets of approximately $ 68,000 for the year ended December

In addition, during the year ended December 31, 2021, the Company recorded approximately $ 774,000 of impairment charges on

a vendor contract.

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

The Company tests goodwill for impairment annually as of October 31 st , referred to as the annual test date.

Conditions that

could trigger a more frequent impairment assessment include, but are not limited to, a significant adverse change to the Company in certain

agreements, significant underperformance relative to historical or projected future operating results, loss of customer relationships,

an economic downturn in customers’ industries, or increased competition.

Impairment testing for goodwill is performed at the reporting-unit

The Company has determined that its business consists of two operating segments and two reporting units.

No impairment charges

were recorded during the years ended December 31, 2021 or 2020.

Company tests goodwill for impairment annually as of October 31 st , referred to as the annual test date.

impairment test for the Healthcare IT segment is performed using the discounted cash flow approach.

Conditions that could

trigger a more frequent impairment assessment include, but are not limited to, a significant adverse change to the Company in

certain agreements, significant underperformance relative to historical or projected future operating results, loss of customer

relationships, an economic downturn in customers’ industries, or increased competition.

Impairment testing for goodwill is

performed at the reporting-unit level.

The Company has determined that its business consists of two operating segments and two

reporting units.

No impairment charges were recorded during the years ended December 31, 2022 or 2021.

Stock — Treasury stock is recorded at cost and represents shares repurchased by the Company.

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in recognizing the expense for share-based payments, as historical forfeiture rates have not been significant.

restricted stock units (“RSUs”) classified as equity, the market price of our common stock on the date of grant is used in

recording the fair value of the award.

For RSUs classified as a liability, the earned amount is marked to market based on the end-of-period

common stock price.

For restricted stock units

(“RSUs”) classified as equity, the market price of our common stock on the date of grant is used in recording the fair value

of the award.

For RSUs classified as a liability, the earned amount is marked to market based on the end-of-period common stock price.

Combinations — The Company accounts for business combinations under the provisions of ASC 805, Business Combinations ,

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costs are expensed as incurred.

During the years ended December 31, 2021 and 2020, the Company incurred approximately

$ 316,000 and $ 275,000 , 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.

During the year ended December 31, 2021, the Company incurred approximately $ 316,000 of professional

fees related to the medSR acquisition discussed in Note 3, which are included in general and administrative expenses in the consolidated

statements of operations.

Taxes — The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred

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The Board of Directors has declared monthly

dividends on the Series A Preferred Stock through February 2022 and also declared a monthly dividend on the Series B Preferred Stock

for stockholders of record February 28, 2022.

Preferred Stock dividends are charged against paid in capital because the Company does

not have sufficient retained earnings.

The Company is prohibited from paying dividends on its common stock without the prior written

consent of its lender, Silicon Valley Bank (“SVB”).

dividends on the Series A and Series B Preferred Stock through February 2023.

Preferred Stock dividends are charged against paid in capital

because the Company does not have sufficient retained earnings.

The Company is prohibited from paying dividends on its common stock without

the prior written consent of its lender, Silicon Valley Bank (“SVB”).

Revenue — Deferred revenue primarily consists of payments received in advance of the revenue recognition criteria being met.

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for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable

for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or

are unobservable inputs that are used to measure fair value to the extent observable inputs are not available.

for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation

or other means.

Inputs are unobservable inputs

that are used to measure fair value to the extent observable inputs are not available.

Company’s contingent consideration is a Level 3 liability and is measured at fair value at the end of each reporting period.

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they are not deemed to be permanently reinvested.

Foreign currency transaction gains/losses are reported as a component of other income

– net in the consolidated statements of operations and amounted to gains of approximately $ 16,000 and $ 14,000 for the years ended

December 31, 2021 and 2020, respectively.

on Lease Termination, Impairment and Unoccupied Lease Charges — Loss on lease termination represents the write-off of leasehold

improvements as the result of early lease terminations.

Impairment charges represent charges recorded for leased facilities no longer

being used by the Company.

Unoccupied lease charges represent the portion of lease and related costs for that portion of the space that

is vacated and not being utilized by the Company.

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

The Company was able to turn

back to the landlord one of the unused facilities effective January 1, 2022.

Foreign currency transaction gains/losses are reported as a component of other expense

– net in the consolidated statements of operations and amounted to losses of approximately $ 610,000 and gains of $ 16,000 for the

years ended December 31, 2022 and 2021, respectively.

Loss on Lease Termination, Impairment and Unoccupied Lease Charges — Net loss on lease termination represents the write-off

of leasehold improvements as the result of early lease terminations.

Impairment charges represent charges recorded for leased facilities

no longer being used by the Company.

Unoccupied lease charges represent the portion of lease and related costs for that portion of the

space that is vacated and not being utilized by the Company.

The Company was able to turn back to the landlord one of the unused facilities

effective January 1, 2022.

Accounting Pronouncements — From time to time, new accounting pronouncements are issued by the Financial Accounting Standards

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years beginning on or after December 15, 2022.

The Company is in the process of determining if this update will have a significant impact

on the consolidated financial statements.

The Company determined that this update will not have a material impact on the consolidated

financial statements upon adoption on January 1, 2023.

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

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this standard.

2020, the FASB issued ASU 2020-04 to simplify the accounting for contract modifications made to replace LIBOR or other reference rates

that are expected to be discontinued because of reference rate reform.

The guidance provides optional expedients and exceptions for applying

GAAP to these contract modifications if certain criteria are met.

The optional expedients and exceptions can be applied to contract

modifications made until December 31, 2022.

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

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

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

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.

The Company adopted this guidance effective January 1, 2022.

There was no impact on the consolidated financial statements as

a result of this standard.

October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities

from Contracts with Customers.

The amendments in

this update require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business

The amendments are effective for public business entities for fiscal years beginning after December 15, 2022.

is in the process of determining if this update will have a significant impact on the consolidated financial statements.

The amendments in this update require acquiring entities to apply Topic 606 to recognize and measure

contract assets and contract liabilities in a business combination.

The amendments are effective for public business entities for fiscal

years beginning after December 15, 2022.

The Company determined that this update will not have a significant impact on the consolidated

financial statements.

June 1, 2021, CAC entered into an Asset and Stock Purchase Agreement (“Purchase Agreement”) with MedMatica and its sole shareholder.

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$ 3.8 million.

The Purchase Agreement also provides that if during the 18-month period commencing on June 1, 2021 (the “Earn-Out

The Purchase Agreement also provided that if during the 18-month period commencing on June 1, 2021 (the “Earn-Out

Period”), certain EBITDA and revenue targets with respect to the assets and capital stock purchased under the Purchase Agreement

are achieved, then CAC shall pay MedMatica an earn-out up to a maximum of $ 8 million.

were achieved, then CAC would pay MedMatica an earn-out up to a maximum of $ 8 million.

Further, if during the Earn-Out Period, certain

additional and increased EBITDA and revenue targets with respect to the assets and capital stock purchased under the Purchase Agreement

are achieved, then CAC shall pay MedMatica an additional earn-out, up to a maximum of $ 5 million.

were achieved, then CAC would pay MedMatica an additional earn-out, up to a maximum of $ 5 million.

At the end of the Earn-Out period,

it was determined that no amounts were due to the seller.

and SRS are in the business of providing a broad range of specialty consulting services to hospitals and large healthcare groups, including

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OF TOTAL CONSIDERATION ON BUSINESS CONSIDERATION

Purchase Price

medSR Purchase Price

($ in thousands)

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Contingent consideration

Preferred stock

Total purchase price

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($ in thousands)

Contract asset

and equipment

Operating lease right-of-use assets

relationships

long term assets

expenses & compensation

lease liabilities

Other current liabilities

Current loan payable

purchase price allocation

acquired accounts receivable is recorded at fair value, which represents amounts that have subsequently been paid or were expected to

Accounts receivable

Receivable from seller

Prepaid expenses

Unbilled receivables

Property and equipment

Customer relationships

Acquired backlog

Accounts payable

Accrued expenses & compensation

Deferred revenue

Total purchase price allocation

acquired accounts receivable was recorded at fair value, which represents amounts that have subsequently been paid or were expected to

be paid by clients.

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It was estimated

that the probable payment was approximately $ 5.6 million as of the acquisition date and this amount has been recorded as part of the

purchase price allocation as contingent consideration.

At December 31, 2021, the Company determined that the fair value of the contingent

consideration was approximately $ 1.5 million, based in part on the actual operating results for the seven months since the acquisition.

The difference has been recorded as a change in contingent consideration in the consolidated statements of operations.

part of the acquisition, $ 1.5

million of the purchase price was held in escrow,

which represented $ 500,000

to be paid upon the achievement of agreed-upon

revenue and backlog milestones, and the balance to be held for up to 18

months to satisfy certain indemnification obligations.

During the third quarter, the initial portion of the escrow was settled whereby $ 250,000

was paid to the seller and $ 250,000

that the probable payment was approximately $ 5.6 million as of the acquisition date and this amount was recorded as part of the purchase

price allocation as contingent consideration.

At December 31, 2021, the Company determined that the fair value of the contingent consideration

was approximately $ 3.1 million, based in part on the actual operating results since the acquisition.

At the end of the 18-month period,

it was determined that no earn-out payment was due to the seller and accordingly, there was no contingent consideration recorded as of

December 31, 2022.

The difference in the contingent consideration between December 31, 2022 and December 31, 2021 has been recorded as

a change in contingent consideration in the consolidated statements of operations.

part of the acquisition, $ 1.5 million of the purchase price was held in escrow, which represented $ 500,000 to be paid upon the achievement

of agreed-upon revenue and backlog milestones, and the balance to be held for up to 18 months to satisfy certain indemnification obligations.

During the third quarter of 2021, the initial portion of the escrow was settled whereby $ 250,000 was paid to the seller and $ 250,000

was offset against the working capital adjustment.

An additional $ 71,000

that was held in escrow was also paid.

The balance of the $ 1 .0

million escrow is included in consideration payable

and restricted cash in the consolidated balance sheet at December 31, 2021.

Approximately $ 12.3

million in cash was paid at closing.

An additional $ 71,000 that was held in escrow was also paid.

Approximately $ 12.3 million

in cash was paid at closing.

The balance of $ 1 .0 million escrow is included in consideration payable and restricted cash in the consolidated

balance sheet at December 31, 2021.

During the quarter ended December 31, 2022, $ 1 .0 million was paid to the seller settling the remaining

portion of the escrow.

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

earned from the clients obtained from the medSR acquisition on June 1, 2021 was approximately $ 15.9 million for

the year ended December 31, 2021.

earned as a result of the medSR acquisition was approximately $ 29.7 million and $ 15.9 million for the years ended December 31, 2022 and

2021, respectively.

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

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customer relationship resources and specialized trained staff.

June 16, 2020, the Company 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 the Company 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 combination.

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

summary of the total consideration is as follows:

Purchase Price

in thousands)

purchase price

the Series A 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 Series A 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 Series A 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

The purchase price allocation for Meridian is summarized as follows:

in thousands)

and equipment

lease right-of-use assets

relationships

expenses & compensation

lease liabilities

current liabilities

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 $ 36.1

million and $ 21.5

million for the years ended December 31, 2021

and 2020, respectively.

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

a Delaware corporation (“CareCloud Corp.”), 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 Corp.

(the “Merger”), with CareCloud Corp.

as a wholly-owned subsidiary of the Company.

The Merger became effective simultaneously with the execution of the Merger Agreement.

revenues related to CareCloud Corp.

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

The 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 Series A Preferred Stock.

The Merger Agreement provides

that if CareCloud Corp.’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 had 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:

Purchase Price

in thousands)

consideration

purchase price

the Series A 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.

The escrowed shares net of such losses were released

upon the joint instruction of the Company and Runway in accordance with the applicable escrow terms.

Such shares were entitled to the

monthly dividend, which was to be paid when, and if, the shares were released.

The Company had accrued the dividend monthly on the Series

A Preferred Stock held in escrow.

Due to the settlement of the obligation in April 2021, accrued dividends of $ 513,000 relating

to the 160,000 shares held in escrow were reversed during the first quarter of 2021.

The shares held in escrow were forfeited to cover

the cost of the settlement.

was determined that 55,822 shares of the Series A 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 million.

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 held in escrow have been released.

Company’s Series A 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

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 were subject to a civil regulatory investigation and were subsequently settled.

Similar 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

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

CareCloud Corp.

The following table summarizes the purchase price allocation:

in thousands)

and equipment

lease right-of-use assets

relationships

long term assets

expenses & compensation

lease liabilities

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 CCH acquisition was approximately $ 35.3 million and $ 31.7 million during the years ended December

31, 2021 and 2020, respectively.

forma financial information (Unaudited)

unaudited pro forma information below represents the consolidated results of operations as if the CCH, Meridian and medSR

acquisitions occurred on January 1, 2020.

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 is approximately

million of additional revenue primarily recorded by medSR for the year ended December 31, 2021 and reflected as a pro forma

adjustment below.

Other differences arise from amortizing purchased intangibles using the double declining balance

unaudited pro forma information below represents the consolidated results of operations as if the medSR acquisition occurred on

January 1, 2021.

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 acquisition 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

The difference between the actual revenue and the pro forma revenue is approximately $ 17.8 million of additional

revenue primarily recorded by medSR for the year ended December 31, 2021 and reflected as a pro forma adjustment below.

differences arise from amortizing purchased intangibles using the double declining balance method.

OF BUSINESS ACQUISITION PRO FORMA INFORMATION

Ended December 31,

Year Ended December 31, 2021

($ in thousands, except per share amounts)

income (loss)

loss attributable to common shareholders

loss per common share

Total revenue

Net loss attributable to common shareholders

Net loss per common share

GOODWILL AND INTANGIBLE ASSETS – NET

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OF INTANGIBLE ASSETS AND GOODWILL

ended December 31,

Year Ended December 31,

($ in thousands)

gross balance

Acquisitions,

net of adjustments

gross balance

December 31, 2021, and 2020, approximately $ 90,000 of goodwill was allocated to the Practice Management segment and the balance was allocated

to the Healthcare IT segment.

Beginning gross balance

Acquisition, net of adjustments

Ending gross balance

December 31, 2022, and 2021, approximately $ 90,000 of goodwill was allocated to the Medical Practice Management segment and the balance

was allocated to the Healthcare IT segment.

is a summary of intangible asset activity for the years ended December 31, 2022 and 2021:

OF FINITE - LIVED INTANGIBLE ASSETS

Other Intangible

Relationships

($ in thousands)

January 1, 2021

software costs

intangible assets

from 2021 acquisitions

December 31, 2021

January 1, 2021

December 31, 2021

January 1, 2020

software costs

intangible assets

from 2020 acquisitions

December 31, 2020

January 1, 2020

December 31, 2020

intangible assets primarily represent software costs.

Amortization expense was approximately $ 10.3 million

and $ 8.6 million for the years ended December 31, 2021 and 2020, respectively.

The weighted-average amortization period is three

Balance, January 1, 2022

Translation loss

Allocation from 2021 acquisition

Balance, December 31, 2022

ACCUMULATED AMORTIZATION

Balance, January 1, 2022

Amortization expense

Balance, December 31, 2022

Net book value

Balance, January 1, 2021

Translation loss

Allocation from 2021 acquisition

Balance, December 31, 2021

ACCUMULATED AMORTIZATION

Balance, January 1, 2021

Amortization expense

Balance, December 31, 2021

Net book value

amount for capitalized software represents payroll and development costs incurred for internally developed software.

Other intangible

assets primarily represent non-compete agreements, purchased and acquired software and trademarks.

Amortization expense was approximately

$ 9.8 million and $ 10.3 million for the years ended December 31, 2022 and 2021, respectively.

The weighted-average amortization period

is three years .

of December 31, 2022, future amortization expense scheduled to be expensed is as follows:

OF FINITE-LIVED INTANGIBLE ASSETS, FUTURE AMORTIZATION EXPENSE

Years ending December 31,

($ in thousands)

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OF PROPERTY AND EQUIPMENT

ended December 31,

($ in thousands)

furniture and equipment

Transportation

not placed in service

property and equipment

accumulated depreciation

and equipment – net

Computer equipment

Office furniture and equipment

Transportation equipment

Leasehold improvements

Assets not placed in service

Total property and equipment

Less accumulated depreciation

Property and equipment – net

expense was approximately $ 2.0 million and $ 1.9 million for the years ended December 31, 2022 and 2021, respectively.

CONCENTRATIONS

Risks — As of December 31, 2021 and 2020, the Company held cash of approximately $ 1.7 million

and $ 1.4 million, respectively, in the name of its subsidiaries, at banks in Pakistan and Sri Lanka.

The banking systems in these

countries do not provide deposit insurance coverage.

Additionally, from time to time, the Company maintains cash balances at financial

institutions in the United States in excess of federal insurance limits.

Risks — As of December 31, 2022 and 2021, the Company held cash of approximately $ 1.8 million and $ 1.7 million, respectively,

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

The banking systems in these countries do not provide deposit insurance

Additionally, from time to time, the Company maintains cash balances at financial institutions in the United States in excess

of federal insurance limits.

The Company has not experienced any losses on such accounts.

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require collateral for outstanding trade accounts receivable.

As of December 31, 2021, two customers

each individually accounted for approximately 5 % of accounts receivable.

As of December 31, 2020, two customers individually accounted

for approximately 10 % and 6 % of accounts receivable, respectively.

During the years ended December 31, 2021 and 2020 , there was

one customer with sales of approximately 9 % and 7 % of total revenue, respectively.

As of December 31, 2022, two customers each individually accounted for

approximately 6 % of accounts receivable.

As of December 31, 2021, two customers each individually accounted for approximately 5 % of accounts

receivable, respectively.

During the years ended December 31, 2022 and 2021, there was one customer with sales of approximately 7 % and

9 % of total revenue, respectively.

Risks — The Company’s offices in Islamabad and Bagh, Pakistan, and Colombo, Sri Lanka conduct significant back-office

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amounts of net assets located outside the United States were approximately $ 8.5

million and $ 4.5 million as of December 31, 2021 and 2020, respectively.

These balances exclude intercompany

receivables of approximately $ 4.1 million and $ 5.6 million as of December 31, 2021 and

2020, respectively.

The following is a summary of the net assets located outside the United States as of December 31, 2021 and 2020:

million and $ 7.2

million as of December 31, 2022 and 2021, respectively.

These balances exclude net intercompany receivables of approximately $ 1.0

million and $ 4.1

million as of December 31, 2022 and 2021, respectively.

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

States as of December 31, 2022 and 2021:

OF CONCENTRATION OF RISK, BY GEOGRAPHICAL RISKS FACTOR

($ in thousands)

Current assets

Non-current assets

Current liabilities

Non-current liabilities

NET LOSS PER COMMON SHARE

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OF LOSSES PER SHARE, BASIC AND DILUTED

Year Ended December 31,

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

loss attributable to common shareholders

Weighted-average

common shares used to compute basic and diluted loss per share

loss attributable to common shareholders per share - basic and diluted

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.

Basic and Diluted:

Net loss attributable to common shareholders

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

Net loss attributable to common shareholders per share - basic and diluted

December 31, 2022, the 598,245 unvested restricted stock units (“RSUs”) as discussed in Note 15 and 1,128,489 unexercised

warrants expiring between January 2023 and September 2023 with exercise prices between $ 5.00 and $ 10.00 have been excluded from the above

calculations as they were anti-dilutive.

At December 31, 2021, the 331,039 unvested equity RSUs and 3,152,140 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

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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 and during the third quarter of 2021, the credit line was further increased to

and the term was extended for another year.

As of December 31, 2021, there was $ 8 million

outstanding on the line of credit.

Subsequent to the year-end, the credit line was repaid.

At December 31, 2020, 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 %.

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

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

During the third quarter of 2021, the credit line was further increased to $ 20 million and the term was extended for another year.

During February 2023, the line of credit was increased to $ 25 million and the term was extended for two years.

(See Note 20).

both December 31, 2022 and 2021, there were $ 8 million of 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.

acquisitions are subject to approval by SVB.

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

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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

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

They had 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 and net exercise rights.

These warrants were exercised during 2022.

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 and net exercise rights.

The additional warrants were valued at $ 3.58 per warrant.

The SVB credit agreement contains various covenants and conditions governing

the revolving line of credit.

These covenants include a minimum level of adjusted EBITDA and a minimum liquidity ratio.

At December 31,

2021 and 2020, the Company was in compliance with all covenants.

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

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

During September 2021, the agreement

with SVB was modified to include CAC and medSR as borrowers.

The SVB credit agreement contains

various covenants and conditions governing the revolving line of credit including a current annual fee of $ 100,000 .

These covenants include

a minimum level of adjusted EBITDA and a minimum liquidity ratio.

At December 31, 2022 and 2021, the Company was in compliance with all

September 2021, the agreement with SVB was modified to include CAC and medSR as borrowers.

During January 2022, the agreement with SVB

was modified to allow the Company to issue Series B Preferred Stock and pay monthly dividends on this stock, to use a portion of the

offering proceeds to redeem a portion of the Series A Preferred Stock that is outstanding and to allow for the potential exchange of

shares of Series A Preferred Stock for Series B Preferred Stock.

During September 2021, the agreement with SVB was modified to include

CAC and medSR as borrowers.

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

5 unchanged sentences

OF MATURITIES OF LONG-TERM DEBT

Line of Credit*

Financing Notes

($ in thousands)

The line of credit was repaid after year-end.

* The line of credit

was repaid after the year-end.

Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers .

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a customer, and is the unit of account under ASC 606.

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 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 many services the Company recognizes

revenue as a percent of the amount the customer collects on the medical billing claims.

The Company’s software is utilized at the

time the provider sees the patient, and 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.

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

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OF DISAGGREGATION OF REVENUE

Ended December 31,

Year Ended December 31,

($ in thousands)

Technology-enabled

business solutions

and mailing services

purchasing services

Practice Management:

practice management services

Healthcare IT:

Technology-enabled business solutions

Professional services

Printing and mailing services

Group purchasing services

Medical Practice Management:

Medical practice management services

Technology-enabled

business solutions:

derived on an on-going basis from our technology-enabled solutions is typically billed as a percentage of payments collected by

our customers.

The fee for our services includes the ability to use our EHR and practice management software as well as RCM as part of

the bundled fee.

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.

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 fee for these services

typically includes use of practice management software and related tools (on a 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.

derived on an on-going basis from our technology-enabled solutions, which typically includes revenue cycle management services, is billed

as a percentage of payments collected by our customers.

The fee for our services often includes the ability to use our EHR and practice

management software as well as RCM as part of the bundled fee.

Technology-assisted

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.

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.

these services typically includes use of practice management software and related tools (on a 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

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over time as that individual service is rendered.

health services:

digital health services, which began generating revenue in 2022, include chronic care management, where a care manager has remote visits

with patients with one or more chronic conditions under the supervision of a physician who is our client.

It also includes remote patient

monitoring where our system monitors recordings from FDA approved internet connected devices.

These devices record patient trends and

alerts the physician to changes which might trigger the need for additional follow-up visits.

The performance obligation for chronic

care management is satisfied at a point in time once the patient receives the services.

The performance obligation for remote patient

monitoring is satisfied over time as the patient receives the services.

The revenue for these services for the year ended December 31,

2022 was not material.

professional services include an extensive set of services including EHR vendor-agnostic optimization and activation, project management,

1 unchanged sentence

systems and hospitals.

Revenue is recorded monthly on a time and materials or a fixed rate basis.

This is a separate performance obligation

from any RCM or SaaS services provided, for which the Company receives and records monthly fees.

The performance obligation is satisfied

over time as the professional services are rendered.

over time using the input method.

The revenue is recorded on a monthly basis as the professional services are rendered.

and mailing services:

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companies at a discounted price.

Currently, there are approximately 4,000 medical providers who

are members of the program.

Revenue is recognized as the vaccine shipments are made to the medical providers.

Fees from the pharmaceutical

companies are paid either quarterly or annually and the Company adjusts its revenue accrual at the time of payment.

The Company makes

significant judgments regarding the variable consideration which we expect to be entitled to for the group purchasing services which

includes the anticipated shipments to the members enrolled in the program, anticipated volumes of purchases made by the members, and

the changes in the number of members.

The amounts recorded are constrained by estimates of decreases in shipments and loss of members

to avoid a significant revenue reversal in the subsequent period.

The only performance obligation is to provide the pharmaceutical companies

with the medical providers who want to become members in order to purchase vaccines.

The performance obligation is satisfied once the

medical provider agrees to purchase a specific quantity of vaccines and the medical provider’s information is forwarded to the

vaccine suppliers.

The Company records a contract asset for revenue earned and not paid as the ultimate payment is conditioned on achieving

certain volume thresholds.

Currently, there are approximately 4,000 medical providers who are members of the program.

recognized as the vaccine shipments are made to the medical providers.

Fees from the pharmaceutical companies are paid either quarterly

or annually and the Company adjusts its revenue accrual at the time of payment.

The Company makes significant judgments regarding the

variable consideration which we expect to be entitled to for the group purchasing services which includes the anticipated shipments to

the members enrolled in the program, anticipated volumes of purchases made by the members, and the changes in the number of members.

The amounts recorded are constrained by estimates of decreases in shipments and loss of members to avoid a significant revenue reversal

in the subsequent period.

The only performance obligation is to provide the pharmaceutical companies with the medical providers who want

to become members in order to purchase vaccines.

The performance obligation is satisfied once the medical provider agrees to purchase

a specific quantity of vaccines and the medical provider’s information is forwarded to the vaccine suppliers.

The Company records

a contract asset for revenue earned and not paid as the ultimate payment is conditioned on achieving certain volume thresholds.

all of the above revenue streams other than group purchasing services, revenue is recognized over time, which is typically one month

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Each of the services provided above is considered a separate performance obligation.

management services:

Company also provides practice management services under long-term management service agreements to three medical

We provide the medical practices with the nurses, administrative support, facilities, supplies, equipment, marketing, RCM,

accounting, and other non-clinical services needed to efficiently operate their practices.

Revenue is recognized as the services are

provided to the medical practices.

Revenue recorded in the consolidated statements of operations represents the reimbursement of costs

paid by the Company for the practices and the management fee earned each month for managing the practice.

The management fee is based

on either a fixed fee or a percentage of the net operating income.

practice management services:

Company also provides medical practice management services under long-term management service agreements to three medical practices.

We provide the medical practices with the nurses, administrative support, facilities, supplies, equipment, marketing, RCM, accounting,

and other non-clinical services needed to efficiently operate their practices.

Revenue is recognized as the services are provided to

the medical practices.

Revenue recorded in the consolidated statements of operations represents the reimbursement of costs paid by the

Company for the practices and the management fee earned each month for managing the practice.

The management fee is based on either a

fixed fee or a percentage of the net operating income.

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

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

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 very limited

circumstances.

The Company receives a management fee each month for managing the day-to-day business operations of each medical group

as a fixed fee or a percentage payment of the net operating income which is included in revenue in the consolidated statements of operations.

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.

The performance obligation

is satisfied as the management services are provided.

contracts for medical practice management services have approximately an additional 16 years remaining and are only cancellable under

very limited circumstances.

The Company receives a management fee each month for managing the day-to-day business operations of each

medical group as a fixed fee or a percentage payment of the net operating income which is included in revenue in the consolidated statements

of operations.

medical 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:

of December 31, 2021, the estimated revenue expected to be recognized in the future related to the remaining revenue cycle management

performance obligations outstanding was approximately $ 4.3

to recognize substantially all of the revenue for the remaining performance obligations over the next three

of December 31, 2022, the estimated revenue expected to be recognized in the future related to the remaining revenue cycle

management performance obligations outstanding was approximately $ 4

We expect to recognize substantially all of the revenue for the remaining performance obligations over the next three

Approximately $ 371,000

of the contract asset represents

revenue earned, not paid, from the group purchasing

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.

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OF ACCOUNTS RECEIVABLE, CONTRACT ASSET AND DEFERRED REVENUE

Receivable, Net

Deferred Revenue

($ in thousands)

as of January 1, 2021

increase, net

as of December 31, 2021

as of January 1, 2020

increase, net

as of December 31, 2020

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 $ 931,000

and $ 970,000

31, 2021 and 2020, respectively, and are included in the Other Assets amounts in the consolidated balance

Balance as of January 1, 2022

medSR acquisition

(Decrease) increase, net

Balance as of December 31, 2022

Balance as of January 1, 2021

Beginning Balance

medSR acquisition

(Decrease) increase, net

Balance as of December 31, 2021

Ending Balance

sales incentive plans include commissions payable to employees and third parties at the time of the 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 $ 643,000 and $ 931,000 at December 31, 2022 and 2021, respectively,

and are included in the other assets amounts in the consolidated balance sheets.

SHAREHOLDERS’ EQUITY

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The last program expired January 25, 2017 .

As a result of these stock repurchases,

the Company has 740,799

common shares held as treasury stock at an aggregate

cost of $ 662,000 .

Company has the right to sell up to $ 50

million of its common stock

using an “at-the-market” facility (“ATM”).

The underwriter receives 3 %

of the gross proceeds.

During the year ended December

31, 2021, the Company sold 346,389

shares of common

stock under its ATM and received net proceeds of approximately $ 2.7

There were no common stock offerings during 2020.

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

Company has the right to sell up to $ 50 million of its common stock using an “at-the-market” facility (“ATM”).

The underwriter receives 3 % of the gross proceeds.

During the year ended December 31, 2022, no shares of common stock were issued under

During the year ended December 31, 2021, the Company sold 346,389 shares of common stock under its ATM and received net proceeds

of approximately $ 2.7 million.

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

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or sinking fund provisions.

the year ended December 31, 2021, the Company cancelled 215,822

shares of preferred

stock that were held in escrow from the CCH acquisition as the matters related to the escrow were settled in cash.

on the Series A 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.

As of December 31, 2021, the Board of Directors has declared monthly dividends on the Series A Preferred

Stock payable through February 2022.

November 4, 2020, the Company may redeem, at its option, the Series A 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

The Series A 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.

the Series A Preferred Stock have no voting rights except for limited voting rights if dividends

payable on the Series A Preferred Stock are in arrears for eighteen or more consecutive or non-consecutive

monthly dividend periods.

If the Company were to liquidate, dissolve or wind up, the holders of the Series

A Preferred Stock will have the right to receive $ 25.00 per share, plus any accumulated and unpaid dividends to, but not including,

the date of payment, before any payment is made to the holders of the common stock.

The Series A Preferred

Stock is listed on the Nasdaq Global Market under the trading symbol “MTBCP.”

Company has issued 6,603,489

warrants for its common stock,

of which 3,152,140

remained outstanding at December

warrants previously issued

exercise price expired in

The outstanding warrants

consist of 1,000,000

warrants at a $ 7.50

exercise price which expired in January

2022 , 798,651

warrants at a $ 7.50

exercise price which will expire in June

2022 , 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 , 1,000,000

warrants at a $ 10.00

exercise price which will expire in January

2023 , 100,000

warrants at a $ 5.00

exercise price which will expire in July

2023 , and 28,489

warrants at a $ 5.26

exercise price which will expire in September

During the years ended December 31, 2021

and 2020, 858,000

warrants, respectively were exercised at a $ 7.50

exercise price for total proceeds of approximately

and $ 4,450,000 ,

respectively.

The common stock is listed on the Nasdaq Global Market under the trading symbol “CCLD.”

Company has seven million authorized shares of preferred stock of which 5,360,000 have been designated as Series A shares and the balance

have been designated as Series B shares.

Company has the right to sell up to $ 35 million of its Series B Preferred Stock using an ATM facility.

The underwriter receives 3 % of

the gross proceeds.

During the year ended December 31, 2022, the Company sold 1,324,858 of shares of Series B Preferred Stock and received

net proceeds of approximately $ 30.9 million.

This includes 224,048 shares sold under the Company’s ATM.

On March 18, 2022, the

Company used a portion of the proceeds from selling Series B Preferred Stock to redeem 800,000 shares of Series A Preferred Stock for

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

the year ended December 31, 2021, the Company cancelled 215,822 shares of Series A Preferred Stock that were held in escrow from the

CCH acquisition as the matters related to the escrow were settled in cash.

November 4, 2020, the Company may redeem, at its option, the Series A 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 Series A 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.

Holders of the Series A Preferred Stock have no voting rights except for limited voting

rights if dividends payable on the Series A Preferred Stock are in arrears for eighteen or more consecutive or non-consecutive monthly

dividend periods.

If the Company were to liquidate, dissolve or wind up, the holders of the Series A Preferred Stock will have the right

to receive $ 25.00 per share, plus any accumulated and unpaid dividends to, but not including, the date of payment, before any payment

is made to the holders of the common stock.

The Series A Preferred Stock is listed on the Nasdaq Global Market under the trading symbol

on February 15, 2024 and prior to February 15, 2025, we may redeem, at our option, the Series B Preferred Stock, in whole or in part,

at a cash redemption price of $ 25.75 per share, plus all accrued and unpaid dividends to, but not including, the redemption date.

or after February 15, 2025 and prior to February 15, 2026, we may redeem, at our option, the Series B Preferred Stock, in whole or in

part, at a cash redemption price of $ 25.50 per share, plus all accrued and unpaid dividends to, but not including, the redemption date.

On or after February 15, 2026 and prior to February 15, 2027, we may redeem, at our option, the Series B Preferred Stock, in whole or

in part, at a cash redemption price of $ 25.25 per share, plus all accrued and unpaid dividends to, but not including, the redemption

On or after February 15, 2027, we may redeem, at our option, the Series B 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 Series B Preferred Stock

is listed on the Nasdaq Global Market under the trading symbol “CCLDO.”

on the Series A and Series B Preferred Stock of $ 2.75 and $ 2.19 , respectively, 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.

As of December 31, 2022, the Board of

Directors has declared monthly dividends on the Series A and Series B Preferred Stock payable through February 2023.

Company has issued 6,603,489 warrants for its common stock, of which 1,128,489 remained outstanding at December 31, 2022.

The outstanding

warrants consist of 1,000,000 warrants at a $ 10.00 exercise price which expired in January 2023 , 100,000 warrants at a $ 5.00 exercise

price which will expire in July 2023 , and 28,489 warrants at a $ 5.26 exercise price which will expire in September 2023 .

During the years

ended December 31, 2022 and 2021, 125,000 and 858,000 warrants, respectively, were exercised at a $ 3.92 and $ 7.50 exercise price for

total proceeds of approximately $ 6,435,000 in 2021.

The warrants exercised in 2022 were a cashless exercise.

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

1 unchanged sentence

In connection with the 2022 and 2021 equity offerings, the Company incurred

approximately $ 223,000

and $ 330,000 ,

respectively, of such costs, excluding underwriting

commissions and placement agent fees which are recorded in additional paid-in capital in the consolidated balance sheets.

approximately $ 2.3 million and $ 223,000 , respectively, of such costs, excluding underwriting commissions and placement agent fees which

are recorded in additional paid-in capital in the consolidated balance sheets.

COMMITMENTS AND CONTINGENCIES

Proceedings — On May 30, 2018, the Superior Court of New Jersey, Chancery Division, Somerset County (the “Chancery Court”)

denied the Company’s and MTBC Acquisition Corp.’s (“MAC”) request to enjoin an arbitration proceeding demanded

by Randolph Pain Relief and Wellness Center (“RPRWC”) related to RCM services provided by parties unaffiliated with the Company

On June 15, 2018, the Company and MAC filed an appeal of the Chancery Court’s decision with the New Jersey Superior Court,

Appellate Division.

On July 19, 2018, the Chancery Court ordered that the arbitration be stayed pending the Company’s and MAC’s

On appeal, the Company and MAC contended they were never party to the billing services agreement giving rise to the arbitration

claim, did not assume the obligations of Millennium Practice Management Associates, Inc.

(“MPMA”) under such agreement, and

any agreement to arbitrate disputes arising under such agreement did not apply to the Company or MAC as RPRWC terminated the agreement

before the APA took effect.

On January 30, 2019, the parties conducted oral arguments before the Appellate Court.

April 23, 2019, the Appellate Division affirmed in part and reversed in part the trial court’s order.

The Appellate Division upheld

the portion of the trial court’s order requiring MAC to participate in the arbitration based on the trial court’s finding

that MAC had assumed MPMA’s contractual responsibilities.

The Appellate Division reversed the trial court’s order requiring

the Company to participate in the arbitration on the grounds that insufficient facts had been provided by RPRWC from which the court

could conclude the Company was required to participate in the arbitration.

As a result, the Appellate Division remanded the issue of

whether Company is required to participate in the arbitration back to the trial court for further proceedings.

parties completed discovery in the remanded matter on November 29, 2019, and thereafter both the Company and RPRWC filed cross-motions

for summary judgment in their favor.

On February 6, 2020, the Chancery Court denied RPRWC’s motion for summary judgment and granted

the Company’s cross-motion for summary judgment.

The Chancery Court held that the Company cannot be compelled to participate in

the Arbitration.

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

to move forward solely against MAC.

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

its arbitration demand RPRWC alleges that MPMA, a subsidiary of MediGain, LLC, breached the terms of the billing services agreement the

parties had entered into and sought compensatory damages of $ 6.6 million and costs.

May 28, 2020, the arbitrator handling the matter conducted a scheduling conference with the parties in order to establish deadlines for

the parties to exchange discovery requests and responses.

During the conference the arbitrator directed RPRWC to produce statement of

damages on which it bases its claim.

RPRWC disclosed its statement of damages to MAC on June 12, 2020.

RPRWC’s June 12, 2020 statement

of damages 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.

At this time, RPRWC has not provided any evidence

to support its increased claim for damages.

RPRWC recently served expert reports in this matter.

Plaintiff’s expert analyzed only

a minute portion of the claims alleged to have been mishandled and then extrapolated damages to be in the range of $ 9.8 million to $ 10.8 million;

however, this is unrealistically based on an alleged 90-100% collection rate on charges.

MAC is preparing rebuttal expert reports

to be submitted shortly.

Currently, the arbitration hearing is scheduled for April 2022.

the allegations of breach of contract made by RPRWC are the subject of the ongoing legal proceedings, MAC believes RPRWC’s allegations

lack merit on numerous grounds.

The Company and MAC plan to vigorously defend against RPRWC’s claim and in the event of a loss,

if any, they anticipate the loss to be substantially less than the amount claimed.

the CCH transaction, we acquired its software technology and related business, of which certain elements were, at the time of the acquisition,

subject to a civil investigation to determine pre-acquisition compliance with certain federal regulatory requirements.

Following the

closing of the transaction, the Company continued to cooperate with the inquiry as CCH had historically done since the commencement of

the investigation in July of 2018.

This element was considered as part of the transaction as $ 4 million of the transaction’s consideration

was held in escrow for the resolution of this investigation.

The Company accrued $ 4.2 million to resolve this investigation, including

the $ 4 million in escrow, which was recorded as an indemnification asset which is included in the condensed consolidated balance sheets

at December 31, 2020 in prepaid expenses and other current assets with an offsetting amount in accrued expenses.

The Company settled

the obligation in April 2021 substantially within the range covered by the escrowed funds.

Proceedings — On December 9, 2022, an arbitrator rendered a decision in favor of MTBC Acquisition Corp.

and dismissed the claims brought against MAC by Randolph Pain Relief and Wellness Center (“RPRWC”), determining that RPRWC

failed to prove any breach of the applicable billing services agreement and failed to prove that any alleged damages were due.

has until April 5, 2023 to file a summary action in Superior Court of New Jersey should it seek to have the decision overturned.

was a client of Millennium Practice Management Associates, Inc.

(“MPMA”), a subsidiary of MediGain, Inc., whose assets were

purchased by MAC on October 3, 2016, after RPRWC terminated its billing services agreement with MPMA.

After MAC’s purchase of MediGain’s

assets, RPRWC demanded an arbitration proceeding against CareCloud and MAC before the American Arbitration Association for damages they

alleged were caused by MPMA prior to the asset purchase.

May 30, 2018, the Superior Court of New Jersey, Chancery Division, Somerset County (the “Chancery Court”) denied CareCloud’s

and MAC’s request to enjoin the arbitration proceeding demanded by RPRWC.

and MAC filed an appeal of the Chancery Court’s decision with the New Jersey Superior Court, Appellate Division.

The Chancery Court

stayed the arbitration pending the appeal.

On appeal, CareCloud and MAC contended they were never party to the billing services agreement

giving rise to the arbitration claim, did not assume the obligations of MPMA under such agreement, and any agreement to arbitrate disputes

arising under such agreement did not apply to CareCloud or MAC as RPRWC terminated the agreement before the applicable asset purchase

agreement took effect.

April 23, 2019, the Appellate Division affirmed in part and reversed in part the Chancery Court’s order.

The Appellate Division

upheld the portion of the Chancery Court’s order requiring MAC to participate in the arbitration based on the Chancery Court’s

finding that MAC had assumed MPMA’s contractual responsibilities.

The Appellate Division, however, reversed the Chancery Court’s

order requiring CareCloud to participate in the arbitration on the grounds that insufficient facts had been provided by RPRWC from which

the court could conclude CareCloud was required to participate in the arbitration and remanded the matter back to the Chancery Court

for further proceedings.

February 6, 2020, the Chancery Court held that CareCloud cannot be compelled to participate in the arbitration.

On March 25, 2020, the

Chancery Court lifted the stay of arbitration relative to RPRWC and MAC.

In its arbitration demand, RPRWC alleged that MPMA, a subsidiary

of MediGain, LLC, breached the terms of the billing services agreement the parties had entered into and sought compensatory damages of

$ 6.6 million and costs.

the discovery phase of the arbitration, RPRWC served expert reports whereby RPRWC’s expert alleged that damages were estimated

to be in the range of $ 9.8 million to $ 10.8 million.

MAC served an expert report refuting the alleged damages.

the event RPRWC files a summary action, MAC will continue to vigorously defend against RPRWC’s claim.

It remains that since MAC

is not a significant subsidiary of CareCloud pursuant to Rule 1-02(w) of Regulation S-X and CareCloud is not a party to this proceeding,

we do not expect any outcome to have a material impact on the Company’s consolidated financial statements.

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

Including the proceedings

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

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

value of lease payments over the lease term.

value of the lease payments over the lease term.

most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rates, which are derived from information

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borrowing rate.

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

During the years ended December

31, 2021 and 2020, lease impairment of approximately $ 68,000 and $ 298,000 , respectively was recorded since the Company is no longer using

certain leased facilities and is currently in the process of trying to sublease one of the spaces.

There were no restructuring charges

in the years ended December 31, 2021 and 2020, respectively.

There were no lease modifications during the years ended December 31, 2022 and 2021.

The anticipated renewal for one

lease was reassessed, resulting in an increase in ROU assets and liabilities of approximately $ 150,000 .

We review our incremental borrowing

rate for our portfolio of leases on a quarterly basis.

the years ended December 31, 2022 and 2021, there were approximately $ 1.0 million and $ 959,000 , respectively, of unoccupied lease charges

for two of the Company’s facilities.

During the year ended December 31, 2021, the Company recorded approximately $ 775,000 of impairment

charges on a vendor contract and recorded a lease impairment of approximately $ 68,000 since the Company is no longer using certain leased

There was no lease impairment recorded for the year ended December 31, 2022.

the year ended December 31, 2022, there was a gain on lease termination of approximately $ 105,000 .

Additionally, a facility lease was

terminated in conjunction with the Company ceasing its document storage services resulting in additional costs of approximately $ 203,000 .

These amounts are included in net loss on lease terminations, impairment and unoccupied lease charges in the consolidated statements

of operations.

the year ended December 31, 2021, the Company decided to terminate one of its leases in Pakistan which expired as of the end of the year.

The Company did not renew this lease and consolidated its employees into the remaining facilities.

As a result of the termination, the

Company incurred a loss of approximately $ 18,000 which has been included in net loss on lease termination, impairment and unoccupied

lease charges in the consolidated statements of operations.

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, 2021, we had 37 leased properties, seven in Practice Management and 30 in Healthcare

IT, with remaining terms ranging from less than one year to fifteen years.

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 – see Note 13.

As of December 31, 2022, we had 31 leased properties, five in Medical Practice Management and 26 in Healthcare

IT, with the remaining terms ranging from less than one year to thirteen years.

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 – see Note 13.

components of lease expense were as follows:

OF LEASE EXPENSE

Year Ended December 31,

($ in thousands)

net lease cost

Operating lease cost

Short-term lease cost

Variable lease cost

Total - net lease cost

lease cost represents leases that were not capitalized as the lease term as of the later of January 1, 2022 or the beginning of the lease

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OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES

December 31, 2022

December 31, 2021

($ in thousands)

lease ROU assets, net

operating lease liabilities

lease expense

exchange loss

average remaining lease term (in years):

average discount rate:

leases, Weighted

Operating leases:

Operating lease ROU assets, net

Current operating lease liabilities

Operating lease liability (current portion)

Non-current operating lease liabilities

Operating lease liability

Total operating lease liabilities

Operating leases:

Asset lease expense

Foreign exchange loss

ROU assets, net

Operating lease right-of-use assets

Weighted average remaining lease term (in years):

Operating leases

Weighted average discount rate:

Operating leases

average discount rate:

Operating leases

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

SCHEDULE OF SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION RELATED TO LEASES

OF SUPPLEMENTAL CASH FLOW AND OTHER INFORMATION RELATED TO LEASES

Year Ended December 31,

($ in thousands)

paid for amounts included in the measurement of lease liabilities:

cash flows from operating leases

assets obtained in exchange for lease liabilities:

leases, net of impairment and terminations

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

Operating cash flows from operating leases

ROU assets obtained in exchange for lease liabilities:

Operating leases, excluding impairments and terminations

of lease liabilities are as follows:

OF MATURITIES OF LEASE LIABILITIES

leases - Years ending December 31,

Operating leases - Years ending December 31,

($ in thousands)

lease payments

Total lease payments

imputed interest

lease obligations

Total lease obligations

current obligations

lease obligations

Long-term lease obligations

RELATED PARTIES

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Revenues from this customer were approximately

$ 23,000 for the year ended December 31, 2021 and approximately

$ 17,000 for the year ended December 31, 2020 .

As of December 31, 2021 and 2020, the accounts receivable

balance due from this customer was approximately $ 3,000 and $ 2,000 respectively, an d is included in accounts receivable in the

consolidated balance sheets.

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

(“KAI”), which is owned by the

Executive Chairman.

The Company recorded an expense of approximately $ 80,000 and $ 120,000 for the years ended December 31, 2021 and 2020,

respectively.

As of December 31, 2021, the Company had no liability outstanding to KAI as compared to liability of approximately $ 1,000

as of December 31, 2020, which was included in accrued liability to related party in the consolidated balance sheet.

The lease for the

aircraft was renewed as of April 1, 2021 and terminated on August 31, 2021 and has been included in the ROU asset and operating lease

liability on December 31, 2020.

As a result of the lease termination, the Company incurred a loss of approximately $ 185,000

which has been included in loss on lease termination, impairment and unoccupied lease charges in the

December 31, 2021 consolidated statement of operations.

Company leases its corporate offices in New Jersey, its temporary housing for its foreign visitors, a printing and mailing facility,

its backup operations center in Bagh, Pakistan and an apartment for temporary housing in Dubai, the UAE, from the Executive

The related party rent expense for the years ended December 31, 2021 and 2020 was approximately $ 186,000

and $ 185,000 ,

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, 2021, the Company spent approximately $ 2 .0

million to upgrade the related party leased facilities and the leased aircraft.

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 approximately

for both the years ended December 31, 2021 and

On October 15, 2021, the Company entered into a one-year lease agreement with the Executive Chairman

for an apartment for temporary housing in Dubai.

$ 58,000 for the year ended December 31, 2022 and approximately $ 23,000 for the year ended December 31, 2021.

As of December 31, 2022

and 2021, the accounts receivable balance due from this customer was approximately $ 10,000 and $ 3,000 respectively, and is included in

accounts receivable - net in the consolidated balance sheets.

Company leases its corporate offices in New Jersey, its temporary housing for its foreign visitors, a storage facility, its backup operations

center in Bagh, Pakistan and an apartment for temporary housing in Dubai, the UAE, from the Executive Chairman.

The related party rent

expense for the years ended December 31, 2022 and 2021 was approximately $ 198,000 and $ 186,000 , respectively, and is included in direct

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

During the years ended December

31, 2022 and 2021, the Company spent approximately $ 941,000 and $ 2 .0 million, respectively, to upgrade the related party leased facilities.

Current assets-related party in the consolidated balance sheets includes security deposits related to the leases of the Company’s

corporate offices in the amount of approximately $ 16,000 and $ 13,000 for the years ended December 31, 2022 and 2021, respectively.

October 15, 2021, the Company entered into a one-year lease agreement with the Executive Chairman for an apartment for temporary housing

This agreement was renewed in 2022 for an additional year.

in the ROU asset at December 31, 2022 is approximately $ 467,000 applicable to the related party leases.

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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.

operating lease liability at December 31, 2021 is approximately $ 174,000 and $ 305,000 , respectively, applicable to the related party

June 2022, the Company entered into a one-year consulting agreement with an entity owned and controlled by one of its

non-independent directors whereby the director received 10,000

shares of Series B Preferred Stock in exchange for assisting the Company to identify and acquire additional companies, including

performing due diligence.

The payment was capitalized and is being amortized over the service period.

The amortization is recorded

as stock compensation in General and Administrative expense in the 2022 consolidated statement of operations.

In addition, the

Company may make additional payments under the agreement for any successful acquisitions by the Company based on the purchase price

of the transaction.

No such additional payments were made in 2022.

During February 2023, the agreement was amended and extended

through December 2024 whereby the director received 14,000

shares of Series B Preferred Stock in February 2023 and will receive an additional 14,000

shares in January 2024.

All such shares of the Series B Preferred Stock are or will be issued in accordance with the Company’s

Amended and Restated Equity Incentive Plan.

In addition to the extension of the consulting agreement, the amendment provides that any

transaction fees due will be offset against the last two above payments before any amounts are due to the director.

2020, a New Jersey corporation, talkMD Clinicians, PA (“talkMD”), was formed by the wife of the Executive Chairman, who is

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As of December 31, 2022, talkMD had not yet commenced

During the year ended December 31, 2021, the Company made arrangements to have the income tax returns prepared for talkMD

and will advance the funds for the required taxes.

The aggregate amount advanced was approximately $ 3,500 .

Cumulatively, the Company has paid approximately $ 4,000 on behalf of talkMD for income taxes.

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

(“KAI”), which was owned by the

Executive Chairman.

The Company recorded an expense of approximately $ 80,000 for the year ended December 31, 2021.

The lease for the

aircraft was renewed as of April 1, 2021 and terminated on August 31, 2021.

As a result of the lease termination, the Company incurred

a loss of approximately $ 185,000 which was included in the net loss on lease termination, impairment and unoccupied lease charges in

the December 31, 2021 consolidated statement of operations.

As of December 31, 2021, the Company had no liability outstanding to KAI.

EMPLOYEE BENEFIT PLANS

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subsidiaries, although there is no match for CPM employees.

contributions to the plans for the years ended December 31, 2021 and 2020 were approximately $ 697,000 and $ 641,000 ,

respectively.

contributions to the plans for the years ended December 31, 2022 and 2021 were approximately $ 549,000 and $ 697,000 , respectively.

Additionally,

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monthly compensation .

The Company’s contributions for the years ended December 31, 2021 and 2020 were approximately

$ 479,000 and $ 341,000 , respectively.

The Company’s contributions for the years ended December 31, 2022 and 2021 were approximately $ 329,000 and

$ 479,000 , respectively.

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

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2021 was approximately $ 22,000 and $ 35,000 , respectively.

The contributions are required to be

deposited with the Employees’ Provident Fund Organization, a government owned entity.

The contributions are required to be deposited with the Employees’ Provident

Fund Organization, a government owned entity.

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.

During 2017, the 2014 Plan

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

for future issuance.

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

During 2020, an additional 2,000,000 shares of common stock and an additional 300,000 shares of Series A 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

As of December 31, 2021, 1,191,383 shares of common stock and 320,065 shares of Series A Preferred Stock are available

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.

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

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

On April 14, 2017,

the Original Plan was amended and restated whereby an additional 1,500,000 shares of common stock and 100,000 shares of Series A Preferred

Stock were added to the plan for future issuance (the “A&R Plan”).

During 2018, an additional 200,000 shares of Series

A Preferred Stock were added to the A&R Plan for future issuance.

In May 2020, an additional 2,000,000 shares of common stock and

an additional 300,000 shares of Series A Preferred Stock were added to the A&R Plan for future issuance.

During 2022, an additional

1,000,000 shares of common stock and 200,000 shares of Series B Preferred Stock were added to the A&R Plan for future issuance.

of December 31, 2022, 1,498,492 shares of common stock and 33,769 and 100,000 shares of Series A and Series B Preferred Stock, respectively,

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

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2021, 628,361 RSUs of common stock were granted to employees and independent contractors to vest at different dates during the years

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.

2021 through 2023.

Included therein were 44,000 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.

2022, 777,715 RSUs of common stock were granted to employees and independent contractors to vest at different dates during the years

2021, 2022 and 2023.

Included therein were 44,000 RSUs of common stock granted over two years equally to the four outside members of

2022 through 2024.

Included therein were 80,000 shares 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, 2021 and 2020:

DISCLOSURE OF SHARE-BASED COMPENSATION ARRANGEMENTS BY SHARE-BASED PAYMENT AWARD

and unvested shares at January 1, 2021

and unvested shares at December 31, 2021

and unvested shares at January 1, 2020

and unvested shares at December 31, 2020

December 2022, it was agreed that certain bonuses to employees of medSR that were originally going to be paid in cash will be paid in

common stock.

The change of paying the bonuses in common stock resulted in approximately 135,000 shares being issued in February 2023.

This change resulted in approximately $ 404,000

of stock compensation expense, which offset the

amounts previously accrued.

following table summarizes the RSU and restricted stock transactions related to the common and Preferred Stock under the A&R Plan

for the years ended December 31, 2022 and 2021:

OF SHARE-BASED COMPENSATION ARRANGEMENTS BY SHARE-BASED PAYMENT AWARD

Preferred Stock

Outstanding and unvested shares at January 1, 2022

Outstanding and unvested shares at December 31, 2022

Outstanding and unvested shares at January 1, 2021

Outstanding and unvested shares at December 31, 2021

of December 31, 2022 and 2021, there was approximately $ 1.4 million and $ 3.7 million, respectively, of total unrecognized compensation

cost related to the common stock RSUs classified as equity that will be expensed through 2024.

There was no unrecognized compensation

cost related to the Preferred Stock RSUs.

the total outstanding and unvested common stock RSUs at December 31, 2021, 331,039 RSUs are classified as equity and 87,000 RSUs are

classified as a liability.

All of the Preferred Stock RSUs are classified as equity.

As of December 31, 2022, there was approximately

$ 557,000 of total unrecognized compensation cost related to the Series B Preferred Stock RSUs classified as equity that will be expensed

through 2023.

There was no unrecognized compensation cost related to the Series A Preferred Stock RSUs for both the years ended December

31, 2022 and 2021.

the total outstanding and unvested common stock RSUs at December 31, 2022 and 2021, 598,245 and 331,039 RSUs, respectively, are classified

as equity and 47,230 and 87,000 RSUs, respectively, are classified as a liability.

For both 2022 and 2021, all of the Preferred Stock

RSUs are classified as equity.

following table summarizes the share activity during the years ended December 31, 2022 and 2021 and the amount of common and preferred

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SCHEDULE OF SHARE-BASED COMPENSATION, RESTRICTED STOCK UNITS AWARD ACTIVITY

available for grant at January 1, 2021

available for grant at December 31, 2021

available for grant at January 1, 2020

shares available for grant

available for grant at December 31, 2020

liability for the cash-settled awards and accrued payroll taxes on equity awards was approximately $ 1 .0 million

and $ 976,000 at December 31, 2021 and 2020, respectively, and is included in accrued compensation in

the consolidated balance sheets.

During the years ended December 31, 2021 and 2020, approximately $ 97,000 and $ 61,000 , respectively,

was paid in connection with the cash-settled awards.

Preferred Stock

Shares available for grant at January 1, 2022

Shares added to the Plan

Shares redesignated as Series B

RSUs forfeited

Shares available for grant at December 31, 2022

Shares available for grant at January 1, 2021

RSUs forfeited

Shares available for grant at December 31, 2021

liability for the cash-settled awards and accrued payroll taxes on equity awards was approximately $ 1.0 million at both December 31,

2022 and 2021, and is included in accrued compensation in the consolidated balance sheets.

During the years ended December 31, 2022 and

2021, approximately $ 105,000 and $ 97,000 , respectively, was paid in connection with the cash-settled awards.

A Preferred Stock

2021 and 2020, the Compensation Committee approved executive bonuses to be paid in 34,000 shares and 44,000 of Series A Preferred Stock,

respectively, with the final number of shares and the amount based on specified performance criteria being achieved during 2021 and 2020.

In 2021 and 2020, 16,010 and 19,579 shares of Series A Preferred Stock were granted as performance bonuses and in lieu of sales commissions,

respectively.

Stock-based compensation expense recorded during 2021 and 2020 for these awards was approximately $ 1.5 million and $ 1.6

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

During February 2022 and January 2021,

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

2021, the Compensation Committee approved executive bonuses to be paid in 34,000 shares of Series A Preferred Stock with the final number

of shares and the amount based on specified performance criteria being achieved during 2021.

Also in 2021, 16,010 shares of Series A

Preferred Stock were granted as performance bonuses and in lieu of sales commissions.

Stock-based compensation expense recorded during

2021 for these awards was approximately $ 1.5 million, based on the fair value of the Series A Preferred Shares on the grant date.

January 2022, the Compensation Committee determined that the financial objectives were attained and all of the performance bonus shares

B Preferred Stock

February 2022, the Compensation Committee approved executive bonuses to be paid in 34,000 shares of Series B Preferred Stock, with the

number of shares and the amount based on specified criteria being achieved during the year 2022.

During February 2023, the Compensation

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

compensation expense

Company 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 Series A 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 $ 9.16 and $ 6.20 for the years ended December 31, 2021 and 2020, respectively.

The weighted average grant date fair value of the Series

A Preferred Stock in connection with the RSUs was $ 28.52 and $ 27.06 for the years ended December 31, 2021 and 2020, respectively.

following table summarizes the components of stock-based compensation expense for the years ended December 31, 2021 and 2020:

awards classified as equity the market price of our common stock or our Series A and Series B Preferred Stock on the date of grant is

used in recording the fair value of the award and includes the related taxes.

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 $ 4.27 and $ 9.16 for the years ended December 31, 2022 and 2021, respectively.

The weighted average grant date fair value of the Series A Preferred Stock in connection with the RSUs was $ 26.69 and $ 28.52 for the

years ended December 31, 2022 and 2021, respectively, and for the Series B Preferred Stock it was $ 25.24 for the year ended December

The following table summarizes the components of stock-based compensation expense for the years ended December 31, 2022 and

SCHEDULE OF EMPLOYEE SERVICE SHARE-BASED COMPENSATION, ALLOCATION OF RECOGNIZED PERIOD COSTS

compensation included in the

ended December 31,

statements of operations:

Stock-based compensation included in the consolidated statements of operations:

Year Ended December 31,

($ in thousands)

operating costs

and administrative

and development

and marketing

stock-based compensation expense

the years ended December 31, 2021 and 2020, the Company estimated its income tax provision based upon the annual pre-tax income

Although the Company reported GAAP earnings in 2021, it incurred losses historically and there is uncertainty

regarding future US taxable income, which makes 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, 2021 and December 31, 2020, 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

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, 2021 and 2020, the net GILTI from our foreign affiliates was absorbed

against our current year U.S.

Direct operating costs

General and administrative

Research and development

Selling and marketing

Total stock-based compensation expense

the years ended December 31, 2022 and 2021, the Company estimated its income tax provision based upon the annual pre-tax income or loss.

Although the Company reported GAAP earnings in 2021 and 2022, it incurred losses historically and there is uncertainty regarding future

taxable income, which makes 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, 2022 and December 31, 2021,

with the exception of a net deferred tax liability relating to the amortization of intangibles for tax purposes.

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.

For the tax years ended December 31, 2022 and 2021, 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, 2021 and 2020:

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.

in the deferred tax valuation allowance was as follows for the years ended December 31, 2022 and 2021:

SCHEDULE OF DEFERRED TAX VALUATION ALLOWANCE

ended December 31,

Year Ended December 31,

($ in thousands)

of acquisitions

Adjustments/true-ups

adjustments/true-ups for 2021 represents adjustments to the basis of the intangible assets from the 2020 acquisitions and the

effect of the net operating loss carryback and other adjustments.

Beginning balance

Current year valuation allowance increase (decrease)

Ending balance

income (loss) before tax for financial reporting purposes during the years ended December 31, 2022 and 2021 consisted of the following:

SCHEDULE OF INCOME BEFORE INCOME TAX, DOMESTIC AND FOREIGN

ended December 31,

Year Ended December 31,

($ in thousands)

United States

provision (benefit) for income taxes for the years ended December 31, 2022 and 2021 consisted of the following:

SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE (BENEFIT)

ended December 31,

Year Ended December 31,

($ in thousands)

income tax provision

Total income tax provision

components of the Company’s deferred income taxes as of December 31, 2022 and 2021 are as follows:

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($ in thousands)

for doubtful accounts

and intangible assets

net operating loss (“NOL”) carryforwards

163(j) interest limitation

based compensation

606 - Section 481(A) adjustment

842 - ROU asset

balance translation adjustment

267 limitation

payroll taxes

842 - Lease liability

Deferred tax assets:

tax liabilities:

deferred tax liability

Allowance for doubtful accounts

Deferred revenue

Property and intangible assets

State net operating loss (“NOL”) carryforwards

Federal net operating loss (“NOL”) carryforwards

Section 163(j) interest limitation

Stock based compensation

ASC 842 - ROU asset

Prepaid commissions

Cumulative balance translation adjustment

Section 267 limitation

Deferred payroll taxes

Credit carryovers

ASC 842 - Lease liability

Accrued compensation

Valuation allowance

Total deferred tax assets

Deferred tax liabilities:

Goodwill amortization

Net deferred tax liability

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

8 unchanged sentences

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

As a result of the Company incurring tax losses for 2021 and 2020 which have an indefinite life under the recent tax reform legislation,

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

net loss deferred tax assets to the extent allowable.

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

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

As a result of the Company having indefinite life net operating losses under the recent tax reform legislation, the federal deferred

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

assets to the extent allowable.

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

unless there is an impairment of goodwill (for financial reporting purposes) or a portion of the business is sold.

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

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SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION

ended December 31,

Year Ended December 31,

($ in thousands)

provision (benefit) at statutory rate

(decrease) in income taxes resulting from:

tax expense, net of federal benefit

Non-deductible

of foreign operations

F GILTI inclusion

based compensation

in contingent consideration

income tax provision

Federal provision at statutory rate

Increase (decrease) in income taxes resulting from:

State tax expense, net of federal benefit

Non-deductible items

Impact of foreign operations

Subpart F GILTI inclusion

Stock based compensation

Change in contingent consideration

NOL carryback

Deferred true-up

Valuation allowance

Total income tax provision

December 31, 2022 and 2021, the Company did not record any uncertain tax positions based on the technical merits.

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various states, Pakistan and Sri Lanka.

As of December 31, 2021, tax years 2018 through 2020 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 allows a tax credit

against earnings from IT activities, which precludes the Pakistan subsidiary from being subject to income taxes.

It is the Company’s

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

Pakistan tax credit 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 2021 and 2020.

The Pakistan statutory corporate tax rate is 29 % before consideration

of the aforementioned tax credit.

of December 31, 2021, the Company has a total federal NOL carry forward of approximately $ 274.5 million of which approximately $ 198.8

million will expire between 2034 and 2037 , and the balance of approximately $ 75.7 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 $ 212.1 million, of which $ 86.5 million relates

to the State of New Jersey.

As of December 31, 2022, all tax years since 2014 remain open to examination due to the carryover

of unused net operating losses and tax credits in the United States by major taxing jurisdictions in which the Company is subject to

For the first six months of 2022, the Pakistan Federal Board of Revenue allowed a 100 % tax credit against earnings from IT activities,

which precludes the Pakistan subsidiaries from being subject to income taxes.

A new tax became effective July 1, 2022, whereby IT companies

are subject to a 0.25% tax deducted at the source on receipts received from foreign sources with no further tax being due .

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

former Pakistan tax credit and foreign receipts tax 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 reconciliation at 21 % for 2022 and 2021.

statutory corporate tax rate is 29 % before consideration of the aforementioned tax credit and the foreign receipts tax.

of December 31, 2022, the Company has a total federal NOL carry forward of approximately $ 273 million of which approximately $ 199 million

will expire between 2034 and 2037, and the balance of approximately $ 74 million has an indefinite life.

Out of the total federal NOL

carry forward, approximately $ 238 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 $ 211 million, of which $ 86 million relates to the

State of New Jersey.

These NOLs expire between 2034 and 2041.

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or liabilities recorded on the consolidated balance sheets, other than the deferred tax liability related to the amortization of goodwill.

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.

The Company believes these new provisions will not have

a significant impact on the consolidated financial statements.

OTHER (EXPENSE) INCOME – NET

(expense) income - net for the years ended December 31, 2021 and 2020 consisted of the following:

OTHER EXPENSE – NET

expense - net for the years ended December 31, 2022 and 2021 consisted of the following:

SCHEDULE OF OTHER (EXPENSE) INCOME - NET

Ended December 31,

Year Ended December 31,

($ in thousands)

exchange gains

(expense) income - net

Foreign exchange (losses) gains

Other expense

Other expense - net

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

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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.

Healthcare IT segment includes revenue cycle management and other services.

The Practice Management segment includes the management of

three medical practices.

Company’s 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) Medical Practice Management.

Healthcare IT segment includes technology-assisted revenue cycle management, SaaS solutions and other services.

The Medical Practice

Management segment includes the management of three medical practices.

Each segment is considered a reporting unit.

The CODM evaluates financial performance of the business units

on the basis of revenue and direct operating costs excluding unallocated amounts, which are mainly corporate overhead costs.

does not evaluate operating segments using asset or liability information.

The accounting policies of the segments are the same as those

disclosed in the summary of significant accounting policies.

The following tables present revenues, operating expenses and operating

income (loss) by reportable segment for the years ended December 31, 2021 and 2020:

SCHEDULE OF REVENUES, OPERATING EXPENSES AND OPERATING INCOME (LOSS) BY REPORTABLE SEGMENT

The CODM evaluates

financial performance of the business units on the basis of revenue and direct operating costs excluding unallocated amounts, which are

mainly corporate overhead costs.

Our CODM does not evaluate operating segments using asset or liability information.

The accounting policies

of the segments are the same as those disclosed in the summary of significant accounting policies.

The following tables present revenues,

operating expenses and operating income (loss) by reportable segment for the years ended December 31, 2022 and 2021:

OF REVENUES, OPERATING EXPENSES AND OPERATING INCOME (LOSS) BY REPORTABLE SEGMENT

Ended December 31, 2022

in thousands)

Practice Management

operating costs

4 unchanged sentences

and amortization

on lease termination, impairment and unoccupied lease charges

loss on lease termination and unoccupied lease charges

operating expenses

income (loss)

Ended December 31, 2020

Healthcare IT

Medical Practice

Year Ended December 31, 2021

($ in thousands)

Practice Management

operating costs

and marketing

and administrative

and development

in contingent consideration

and amortization

and unoccupied lease charges

Healthcare IT

Medical Practice

Operating expenses:

(loss) income

Direct operating costs

Selling and marketing

General and administrative

Research and development

Change in contingent consideration

Depreciation and amortization

Net loss on lease termination, impairment and unoccupied lease charges

Total operating expenses

Operating income (loss)

FAIR VALUE OF FINANCIAL INSTRUMENTS

14 unchanged sentences

any, market activity for the asset or liability.

Our Level 3 instruments include the fair value of contingent consideration related

to completed acquisitions.

The fair value at December 31, 2021 is based on discounted cash flow analysis reflecting the likelihood of

achieving specified performance measure or events and captures the contractual nature of the contingencies, the passage of time and the

associated discount rate.

As of December 31, 2021, the contingent consideration is valued using a Monte Carlo simulation model.

Our Level 3 instruments include the fair value of contingent consideration related to

completed acquisitions.

The fair value at December 31, 2021 is based on discounted cash flow analysis reflecting the likelihood of achieving

specified performance measure or events and captures the contractual nature of the contingencies, the passage of time and the associated

discount rate.

As of December 31, 2021, the contingent consideration was valued using a Monte Carlo simulation model.

There was no contingent

consideration recorded at December 31, 2022.

following table provides a reconciliation of the beginning and ending balances for the contingent consideration measured at fair value

1 unchanged sentence

OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS, UNOBSERVABLE INPUT RECONCILIATION

Value Measurement at Reporting Date Using Significant Unobservable Inputs, Level 3

Ended December 31,

Fair Value Measurement at

Reporting Date Using Significant

Unobservable Inputs, Level 3

Year Ended December 31,

($ in thousands)

in fair value

- December 31,

Balance - January 1,

Change in fair value

Balance - December 31,

SUBSEQUENT EVENTS

January and early February 2022, the Company issued 1,100,810

shares of 8.75 %

Series B Cumulative Redeemable Perpetual Preferred Stock (“Series B Preferred Stock”) raising net proceeds after expenses

of approximately $ 25.5

The Series B Preferred Stock is listed

on the Nasdaq Global Market under the symbol “MTBCO.” Dividends on the Series B Preferred Stock

of approximately $ 2.19

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.

During February 2022, the Board of Directors declared the monthly dividend on the Series B Preferred Stock for February 2022.