CareCloud, Inc S-1, filed Apr 13, 2020

CareCloud, Inc. (CCLD)

S-1 2020-04-13

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Added on October 22, 2026

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Non-accelerated filer [X]	Smaller reporting company [X]
	Emerging growth company [ ]

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price			Amount of Registration Fee ⁽²⁾

Series A Preferred Stock, $0.001 par value per share	$	17,250,000	⁽¹⁾	$	2,239

(1)	Includes up to $2.1 million of Series A Preferred Stock to be sold upon exercise of the underwriters’ option to purchase additional shares at an exercise price of the public offering price less the underwriting discount.
(2)	Calculated pursuant to Rule 457(o) based on the proposed maximum aggregate offering price.

	Per Share		Total
Public offering price	$	25.00
Underwriting discount (1)	$	1.50
Proceeds, before expenses, to MTBC	$	23.50

	Page

Special Note Regarding Forward-Looking Statements	ii
Prospectus Summary	1
The Offering	5
Risk Factors	10
Use of Proceeds	30
Capitalization	31
Unaudited Pro Forma Condensed Combined Financial Information	32
Market Price of and Dividends on the Series A Preferred Stock	39
Description of our Capital Stock	40
Description of the Series A Preferred Stock	43
Certain U.S. Federal Income Tax Considerations	51
Underwriting	57
Legal Matters	59
Experts	59
Where You Can Find More Information	59
Incorporation of Information by Reference	60
Disclosure of Commission Position on Indemnification for Securities Act Liabilities	60

	●	our ability to manage our growth, including acquiring, partnering with, and effectively integrating the recent acquisition of CareCloud Corporation and other acquired businesses into our infrastructure and avoiding legal exposure and liabilities associated with acquired companies and assets;

	●	our ability to retain our clients and revenue levels, including effectively migrating new clients and maintaining or growing the revenue levels of our new and existing clients;

	●	our ability to maintain operations in Pakistan and Sri Lanka in a manner that continues to enable us to offer competitively priced products and services;

	●	our ability to keep pace with a rapidly changing healthcare industry;

	●	our ability to consistently achieve and maintain compliance with a myriad of federal, state, foreign, local, payor and industry requirements, regulations, rules, laws and contracts;

	●	our ability to maintain and protect the privacy of confidential and protected Company, client and patient information;

	●	our ability to develop new technologies, upgrades and adapt legacy and acquired technologies to work with evolving industry standards and third-party software platforms and technologies, and protect and enforce all of these and other intellectual property rights;

	●	our ability to attract and retain key officers and employees, and the continued involvement of Mahmud Haq as Executive Chairman and Stephen Snyder as Chief Executive Officer, all of whom are critical to our ongoing operations, growing our business and integrating of our newly acquired businesses;

	●	our ability to comply with covenants contained in our credit agreement with our senior secured lender, Silicon Valley Bank and other future debt facilities;

	●	our ability to compete with other companies developing products and selling services competitive with ours, and who may have greater resources and name recognition than we have;

	●	our ability to respond to the uncertainty resulting from the recent COVID-19 pandemic and the impact it may have on our operations, the demand for our services, and economic activity in general; and

	●	our ability to keep and increase market acceptance of our products and services.

	●	Revenue cycle management (“RCM”) services, which include end-to-end medical billing, eligibility, analytics, and related services, all of which can often be provided either with our technology platform or through a third-party system;

	●	Proprietary healthcare IT solutions, which are bundled with our RCM services, including:

	○	Electronic health records (“EHR”), which are easy to use, integrated with our business services or offered as SaaS solutions, and allow our healthcare provider clients to reduce paperwork and qualify for incentives;

	○	Practice management (“PM”) software and related tools, which support our clients’ day-to-day business operations and workflows;

	○	Mobile Health (“mHealth”) solutions, including smartphone applications that assist patients and healthcare providers in the provision of healthcare services;

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

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

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

	●	Group purchasing services which include our negotiation of discounts with pharmaceutical manufacturers and the extension of those discounts to our physician members; and

	●	Comprehensive practice management services, which are offered under long-term management service agreements pursuant to which we provide certain practices with the administrative support, facilities, supplies, equipment, marketing, RCM, accounting, healthcare IT and other non-clinical services required to efficiently operate their practices.

Combined Statements of Operations Data
	Year ended December 31,						Pro Forma MTBC ⁽¹⁾
	2018			2019			2019
	(in thousands, except per share data)
Net revenue	$	50,546		$	64,439		$	99,860
Operating expenses:
Direct operating costs		31,253			41,186			65,071
Selling and marketing		1,612			1,522			8,304
General and administrative		16,264			17,912			24,822
Research and development		1,030			871			14,604
Change in contingent consideration		73			(344	)		(344	)
Depreciation and amortization		2,854			3,006			7,453
Restructuring and impairment charges		-			219			219
Total operating expenses		53,086			64,372			120,129

Operating (loss) income		(2,540	)		67			(20,269	)

Interest income - net		(250	)		(121	)		(121	)
Other income (expense) - net		494			(625	)		(67	)
Loss before income taxes		(2,296	)		(679	)		(20,457	)
Income tax (benefit) provision		(158	)		193			211
Net loss	$	(2,138	)	$	(872	)	$	(20,668	)

Preferred stock dividend		4,824			6,386			8,476
Net loss attributable to common shareholders	$	(6,962	)	$	(7,258	)	$	(29,144	)

Net loss per common share, basic and diluted	$	(0.59	)	$	(0.60	)	$	(2.41	)
Weighted average common shares used to compute basic and diluted loss per share		11,721			12,088			12,088

Combined Balance Sheet Data
	As of December 31, 2019
					Pro Forma as
	Actual		Pro Forma ⁽²⁾		Adjusted ⁽³⁾
	(in thousands)
Cash	$	19,994	$	8,141
Working capital (net) ⁽⁴⁾		19,823		1,293
Total assets		56,403		89,115
Total debt		13,565		26,977
Shareholders' equity		42,838		62,138

Other Financial Data
	Year ended December 31,				MTBC ⁽¹⁾
	2018		2019		2019
	(in thousands)
Adjusted EBITDA ⁽⁵⁾	$	4,802	$	8,101	$	(7,962	)

(1)	The pro forma condensed combined statements of operations data for the year ended December 31, 2019 gives effect to the acquisition of the Acquired Businesses as if each Transaction had occurred on January 1, 2019. Pro forma revenue for the year ended December 31, 2019 includes $967,000 of revenue from customers who cancelled their contracts prior to MTBC’s acquisition of the Acquired Businesses. This revenue is included in the pro forma condensed combined statements of operations, even though MTBC will not generate revenues from those customers. You should read the summary combined financial data in conjunction with the information set forth in the Company’s Current Report on Form 8-K/A, filed on March 20, 2020.

(2)	The pro forma condensed combined balance sheet data gives effect to the acquisition of CareCloud as if it had occurred on December 31, 2019.

(3)	The pro forma as adjusted condensed combined balance sheet data gives effect to our issuance and sale of shares of Series A Preferred Stock in this offering at $25.00 per share, assuming net proceeds of approximately , after deducting the underwriting discount and estimated offering expenses payable by us, in addition to the acquisition of CareCloud.

(4)	Working capital is defined as current assets less current liabilities.

(5)	To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and operational decision-making, we supplement our consolidated financial statements presented on a basis consistent with U.S. generally accepted accounting principles, or GAAP, with adjusted EBITDA, a non-GAAP financial measure of earnings. Management uses adjusted EBITDA to provide an understanding of aspects of operating results before the impact of investing and financing charges and income taxes. Adjusted EBITDA may be useful to an investor in evaluating our operating performance and liquidity because this measure excludes non-cash expenses as well as expenses pertaining to investing or financing transactions. Management defines “adjusted EBITDA” as the sum of GAAP net income (loss) before provision for (benefit from) income taxes, net interest expense, foreign currency gains and losses, asset impairment charges and other non-operating expenses, stock-based compensation expense, depreciation and amortization including amortization of purchased intangible assets, integration costs, transaction costs, restructuring costs and changes in contingent consideration.

	Year ended December 31,						Pro Forma MTBC ⁽¹⁾
	2018			2019			2019
	(in thousands)
GAAP net loss	$	(2,138	)	$	(872	)	$	(20,668	)

Income tax (benefit) provision		(158	)		193			211
Net interest expense		250			121			121
Foreign exchange / other expense		(435	)		827			827
Stock-based compensation expense		2,464			3,215			3,215
Depreciation and amortization		2,854			3,006			7,453
Integration, transaction and restructuring costs		1,892			1,736			1,004
Restructuring and impairment charges		-			219			219
Change in contingent consideration		73			(344	)		(344	)
Adjusted EBITDA	$	4,802		$	8,101		$	(7,962	)

Issuer	MTBC, Inc.

Securities Offered	shares of 11% Series A Cumulative Redeemable Perpetual Preferred Stock (or “Series A Preferred Stock”). We have granted the underwriters the option for a period of up to 30 days to purchase up to an additional shares at the public offering price less the underwriting discount.

Series A Preferred Stock to be outstanding after this offering ⁽¹⁾	shares of Series A Preferred Stock

Offering Price	$25.00 per share of Series A Preferred Stock

Dividends	Holders of the Series A Preferred Stock will be entitled to receive cumulative cash dividends at a rate of 11% per annum of the $25.00 per share liquidation preference (equivalent to $2.75 per annum per share). Dividends will be payable monthly on the 15^th day of each month (each, a “dividend payment date”), provided that if any dividend payment date is not a business day, then the dividend that would otherwise have been payable on that dividend payment date may be paid on the next succeeding business day without adjustment in the amount of the dividend. Dividends will be payable to holders of record as they appear in our stock records for the Series A Preferred Stock at the close of business on the corresponding record date, which shall be the last day of the calendar month, whether or not a business day, immediately preceding the month in which the applicable dividend payment date falls (each, a “dividend record date”). As a result, holders of shares of Series A Preferred Stock will not be entitled to receive dividends on a dividend payment date if such shares were not issued and outstanding on the applicable dividend record date. Any dividend payable on the Series A Preferred Stock, including dividends payable for any partial dividend period, will be computed on the basis of a 360-day year consisting of twelve 30-day months; however, the shares of Series A Preferred Stock offered hereby will be credited as having accrued dividends since the first day of the calendar month in which they are issued.

No Maturity, Sinking Fund or Mandatory Redemption	The Series A Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption. Shares of the Series A Preferred Stock will remain outstanding indefinitely unless we decide to redeem or otherwise repurchase them. We are not required to set aside funds to redeem the Series A Preferred Stock.

Optional Redemption	The Series A Preferred Stock is not redeemable by us prior to November 4, 2020. On and after November 4, 2020, we may, at our option, redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price equal to $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the redemption date. Please see the section entitled “Description of the Series A Preferred Stock—Redemption—Optional Redemption.”
Special Optional Redemption	Upon the occurrence of a Change of Control, we may, at our option, redeem the Series A Preferred Stock, in whole or in part, within 120 days after the first date on which such Change of Control occurred, for cash at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the redemption date. A “Change of Control” is deemed to occur when the following have occurred and are continuing: the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the “Exchange Act (other than Mahmud Haq, the chairman of our board of directors and our principal shareholder, any member of his immediate family, and any “person” or “group” under Section 13(d)(3) of the Exchange Act, that is controlled by Mr. Haq or any member of his immediate family, any beneficiary of the estate of Mr. Haq, or any trust, partnership, corporate or other entity controlled by any of the foregoing), of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of our stock entitling that person to exercise more than 50% of the total voting power of all our stock entitled to vote generally in the election of our directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and following the closing of any transaction referred to above, neither we nor the acquiring or surviving entity has a class of common securities (or American Depositary Receipts representing such securities) listed on the NYSE, the NYSE MKT or Nasdaq or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE MKT or Nasdaq.

Liquidation Preference	If we liquidate, dissolve or wind up, 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 our common stock. Please see the section entitled “Description of the Series A Preferred Stock—Liquidation Preference.”

Ranking	The Series A Preferred Stock will rank, with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up, (1) senior to all classes or series of our common stock and to all other equity securities issued by us other than equity securities referred to in clauses (2) and (3); (2) on a parity with all equity securities issued by us with terms specifically providing that those equity securities rank on a parity with the Series A Preferred Stock with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up; (3) junior to all equity securities issued by us with terms specifically providing that those equity securities rank senior to the Series A Preferred Stock with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up; and (4) effectively junior to all of our existing and future indebtedness (including indebtedness convertible into our common stock or preferred stock) and to the indebtedness and other liabilities of (as well as any preferred equity interests held by others in) our existing subsidiaries and any future subsidiaries. Please see the section entitled “Description of the Series A Preferred Stock–Ranking.”

Limited Voting Rights	Holders of Series A Preferred Stock will generally have no voting rights. However, if we do not pay dividends on the Series A Preferred Stock for eighteen or more monthly dividend periods (whether or not consecutive), the holders of the Series A Preferred Stock (voting separately as a class with the holders of all other classes or series of our preferred stock we may issue upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Series A Preferred Stock in the election referred to below) will be entitled to vote for the election of two additional directors to serve on our board of directors until we pay, or declare and set aside funds for the payment of, all dividends that we owe on the Series A Preferred Stock, subject to certain limitations described in the section entitled “Description of the Series A Preferred Stock—Voting Rights.” In addition, the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock (voting together as a class with all other series of parity preferred stock we may issue upon which like voting rights have been conferred and are exercisable) is required at any time for us to authorize or issue any class or series of our capital stock ranking senior to the Series A Preferred Stock with respect to the payment of dividends or the distribution of assets on liquidation, dissolution or winding up, to amend any provision of our certificate of incorporation so as to materially and adversely affect any rights of the Series A Preferred Stock or to take certain other actions. Please see the section entitled “Description of the Series A Preferred Stock—Voting Rights.”

Information Rights	During any period in which we are not subject to Section 13 or 15(d) of the Exchange Act and any shares of Series A Preferred Stock are outstanding, we will use our best efforts to (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series A Preferred Stock, as their names and addresses appear on our record books and without cost to such holders, copies of the Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q that we would have been required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if we were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any holders or prospective holder of Series A Preferred Stock, subject to certain exceptions described in this prospectus. We will use our best efforts to mail (or otherwise provide) the information to the holders of the Series A Preferred Stock within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the SEC, if we were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which we would be required to file such periodic reports if we were a “non-accelerated filer” within the meaning of the Exchange Act.

Listing	Our Series A Preferred Stock is listed on the Nasdaq Global Market under the symbol “MTBCP.”

Use of Proceeds	We plan to use the net proceeds from this offering for working capital, general corporate purposes and growth initiatives, including potential future acquisitions, although the Company has no present plans, arrangements, commitments or agreements for any such acquisitions.

Risk Factors	Please read the section entitled “Risk Factors” beginning on page 10 for a discussion of some of the factors you should carefully consider before deciding to invest in our Series A Preferred Stock.

Transfer Agent	The registrar, transfer agent and dividend and redemption price disbursing agent in respect of the Series A Preferred Stock will be VStock Transfer, LLC.

Certain U.S. Federal Income Tax Considerations	For a discussion of the federal income tax consequences of purchasing, owning and disposing of the Series A Preferred Stock, please see the section entitled “Certain U.S. Federal Income Tax Considerations.” You should consult your tax advisor with respect to the U.S. federal income tax consequences of owning the Series A Preferred Stock in light of your own particular situation and with respect to any tax consequences arising under the laws of any state, local, foreign or other taxing jurisdiction.
Book Entry and Form	The Series A Preferred Stock will be represented by one or more global certificates in definitive, fully registered form deposited with a custodian for, and registered in the name of, a nominee of The Depository Trust Company (“DTC”).

	●	demand and pricing for our products and services;
	●	the encounter volumes of our customer base;
	●	government or commercial healthcare reimbursement policies;
	●	physician and patient acceptance of any of our current or future products;
	●	introduction of competing products;
	●	our operating expenses which fluctuate due to growth of our business;
	●	timing and size of any new product or technology acquisitions we may complete; and
	●	variable sales cycle and implementation periods for our products and services.

	●	prevailing interest rates, changes in which may have an adverse effect on the market price of the Series A Preferred Stock;
	●	trading prices of similar securities;
	●	our history of timely dividend payments;
	●	the annual yield from dividends on the Series A Preferred Stock as compared to yields on other financial instruments;
	●	general economic and financial market conditions;
	●	government action or regulation;
	●	changes to the market and industry conditions as a result of the recent global outbreak of the COVID-19 coronavirus;
	●	the financial condition, performance and prospects of our competitors;
	●	changes in financial estimates or recommendations by securities analysts with respect to us or our competitors in our industry;
	●	our issuance of additional preferred equity or debt securities; and
	●	actual or anticipated variations in quarterly operating results of us and our competitors.

●	reduction of customer revenue as a result of changes to the ACA;

●	a rollback of the expansion of Medicaid or other governmental programs;

●	reduction of customer revenue resulting from increased competition or other changes in the marketplace for physician services;

●	failure of our customers to adopt or maintain effective business practices;

●	actions by third-party payers of medical claims to reduce reimbursement;

●	government regulations and government or other payer actions or inaction reducing or delaying reimbursement;

●	interruption of customer access to our system; and

●	our failure to provide services in a timely or high-quality manner.

	●	be time-consuming and expensive to defend, whether meritorious or not;

	●	require us to stop providing products or services that use the technology that allegedly infringes the other party’s intellectual property;

	●	divert the attention of our technical and managerial resources;

	●	require us to enter into royalty or licensing agreements with third parties, which may not be available on terms that we deem acceptable;

	●	prevent us from operating all or a portion of our business or force us to redesign our products, services or technology platforms, which could be difficult and expensive and may make the performance or value of our product or service offerings less attractive;

	●	subject us to significant liability for damages or result in significant settlement payments; and/or

	●	require us to indemnify our customers.

	●	on an actual basis;
	●	on a pro forma basis, reflecting our acquisition of CareCloud Corporation (“CareCloud”), giving effect to the acquisition as if it had occurred on January 1, 2019; and
	●	on a pro forma as adjusted basis, reflecting the issuance of shares of Series A Preferred Stock offered by this prospectus, at $25.00 per share, assuming net proceeds of approximately , after deducting underwriting discounts and commissions and other offering expenses payable by us, and assuming no exercise of the underwriter’s option to purchase additional shares from us.

	As of December 31, 2019
	Actual			Pro Forma			Pro Forma as Adjusted
	(in thousands, except share data)
Cash	$	19,994		$	8,141
Debt, current portion		11,178			22,557
Long-term debt, net of current portion		2,387			4,420
Total debt		13,565			26,977
Shareholders’ equity
Preferred stock, $0.001 par value, authorized 7,000,000 shares; issued and outstanding, 2,539,325 shares actual, 3,299,325 pro forma and pro forma as adjusted		3			3
Common stock, $0.001 par value - authorized, 29,000,000 shares; issued, 12,978,485 shares actual, pro forma and pro forma as adjusted; outstanding, 12,237,686 actual, pro forma and pro forma as adjusted		13			13
Additional paid-in capital		69,403			88,702
Accumulated deficit		(25,076	)		(25,076	)
Accumulated other comprehensive loss		(843	)		(843	)
Less: 740,799 common shares held in treasury, at cost		(662	)		(662	)
Total shareholders’ equity		42,838			62,138
Total capitalization	$	56,403		$	89,115

	●	129,607 shares of common stock issued under our Equity Incentive Plan subsequent to that date;
	●	421,751 shares of common stock reserved for issuance pursuant to grants under our Equity Incentive Plan;
	●	401,738 shares of common stock reserved for future issuance under our Equity Incentive Plan; and
	●	2,353,489 shares of common stock underlying existing warrants, of which 2,000,000 shares of common stock underlying warrants that were issued as a portion of the consideration for the acquisition of CareCloud.

	●	44,900 shares of Series A Preferred Stock reserved for issuance pursuant to grants under our Equity Incentive Plan; and
	●	133,654 shares of Series A Preferred Stock reserved for future issuance under our Equity Incentive Plan.

	●	Our acquisition of CareCloud, which consists of all of the assets and liabilities of CareCloud with an effective date of January 8, 2020, and
	●	Our acquisition of Etransmedia, which consist of substantially all of the assets and the assumption of certain liabilities of Etransmedia with an effective date of April 1, 2019.

				January 1, 2019 to Mar 31, 2019			MTBC + Previously Acquired						Pro Forma				Pro Forma
	MTBC			ETM			Subtotal			CareCloud			Adjustments				Combined
	(in thousands, except per share data)
Net revenue	$	64,439		$	2,067		$	66,506		$	33,354		$	-			$	99,860
Operating expenses:
Direct operating costs		41,186			2,716			43,902			21,169			-				65,071
Selling and marketing		1,522			-			1,522			6,782			-				8,304
General and administrative		17,912			1,141			19,053			6,501			(732	)	(1)		24,822
Research and development		871			-			871			13,733			-				14,604
Change in contingent consideration		(344	)		-			(344	)		-			-				(344	)
Depreciation and amortization		3,006			20			3,026			3,208			1,219		(2)		7,453
Restructuring and impairment charges		219			-			219			-			-				219
Total operating expenses		64,372			3,877			68,249			51,393			487				120,129

Operating income (loss)		67			(1,810	)		(1,743	)		(18,039	)		(487	)			(20,269	)

Interest expense - net		(121	)		-			(121	)		(4,212	)		4,212		(3)		(121	)
Other expense - net		(625	)		-			(625	)		558			-				(67	)
(Loss) income before income taxes		(679	)		(1,810	)		(2,489	)		(21,693	)		3,725				(20,457	)
Income tax provision		193			2			195			16			-		(4)		211
Net (loss) income	$	(872	)	$	(1,812	)	$	(2,684	)	$	(21,709	)	$	3,725			$	(20,668	)

Preferred stock dividend		6,386			-			6,386			-			2,090		(3)		8,476
Net (loss) income attributable to common shareholders	$	(7,258	)	$	(1,812	)	$	(9,070	)	$	(21,709	)	$	1,635			$	(29,144	)

Weighted-average common shares outstanding:
Basic and diluted		12,088																12,088
Loss per share:
Basic and diluted	$	(0.60	)														$	(2.41	)

	MTBC			CareCloud			Acquisition Related Pro Forma Adjustments				Pro Forma Results
	(in thousands)
Cash	$	19,994		$	808		$	(12,661	)	(6)	$	8,141
Accounts receivable - net		6,995			2,928			(560	)	(6)		9,363
Contract asset		2,385			1,013			-				3,398
Inventory		491			-			-				491
Current assets - related party		13			-			-				13
Other current assets		1,123			1,321			-				2,444
Current assets		31,001			6,070			(13,221	)			23,850
Property and equipment - net		2,908			374			29		(6)		3,311
Operating lease right-of-use assets		3,526			2,930			(71	)	(6)		6,385
Intangible assets - net		5,977			7,472			8,928		(5)		22,377
Goodwill		12,634			-			19,661		(5)		32,295
Other assets		357			540			-				897
Total assets	$	56,403		$	17,386		$	15,326			$	89,115

Accounts payable	$	3,491		$	6,943		$	-			$	10,434
Accrued compensation		1,836			-			-				1,836
Accrued expenses		2,111			2,388			(127	)	(6)		4,372
Operating lease liability (current portion)		1,689			749			77		(6)		2,515
Deferred revenue		20			269			-				289
Accrued liability to related parties		1			-			-				1
Notes payable - other (current portion)		284			7,080			(7,000	)	(6)		364
Contingent consideration		-			-			1,000		(6)		1,000
Dividend payable		1,746			-			-				1,746
Total current liabilities		11,178			17,429			(6,050	)			22,557
Notes payable - other		83			24,708			(24,708	)	(6)		83
Operating lease liability		2,041			2,085			(52	)	(6)		4,074
Deferred revenue		18			-			-				18
Deferred tax liability		245			-			-				245
Total liabilities		13,565			44,222			(30,810	)			26,977
Preferred stock		3			-			1		(6)		4
Common stock		13			144,026			(144,026	)	(6)		13
Additional paid-in capital		69,403			-			19,299		(6)		88,702
Accumulated deficit		(25,076	)		(170,862	)		170,862		(6)		(25,076	)
Accumulated other comprehensive loss		(843	)		-			-				(843	)
Common shares held in treasury		(662	)		-			-				(662	)
Total shareholders’ equity (deficiency)		42,838			(26,836	)		46,136				62,138
Total liabilities and shareholders’ equity (deficiency)	$	56,403		$	17,386		$	15,326			$	89,115

	MTBC		ETM		CareCloud		Pro Forma Adjustments
	(in thousands)
Year ended December 31, 2019	$	337	$	-	$	395	$	732

(2)	Amortization of Purchased Intangible Assets — We amortize intangible assets over their estimated useful lives. We based the estimated useful lives of acquired intangible assets on the amount and timing in which we expect to receive an economic benefit. We typically assign these intangible assets a useful life of between 3-4 years based upon a number of factors, including contractual agreements and economic factors pertaining to the combined companies.

	The estimates of fair value and weighted-average useful lives could be impacted by a variety of factors including legal, regulatory, contractual, competitive, economic or other factors. Increased knowledge about these factors could result in a change to the estimated fair value of these intangible assets and/or the weighted-average useful lives from what we have assumed in these unaudited pro forma condensed combined financial statements. In addition, the combined effect of any such changes could result in a significant increase or decrease to the related amortization expense estimates.

	The amortization of intangible assets of our acquisitions, shown below, assumes that the assets were acquired on January 1, 2019.

	ETM		CareCloud		Total Expense
	(in thousands)
Pro forma amortization expense/adjustment for the period prior to acquisition	$	70	$	4,065	$	4,135
As recorded in the historical financial statements		3		2,913		2,916
Pro forma adjustment	$	67	$	1,152	$	1,219

(3)	Interest and Dividends — The interest expense incurred by CareCloud of approximately $4.2 million for the year 2019 has been eliminated to reflect the full payment of CareCloud’s outstanding debt balance as of the acquisition date. Dividends of approximately $2.1 million have been included as an adjustment to reflect the amounts that would have been recorded as a result of the issuance of the Company’s Preferred Stock as part of the consideration for the acquisition.

(4)	Benefit for Income Tax — The income tax effects reflected in the pro forma adjustments are based on an estimated Federal statutory rate of 21% for the year ended December 31, 2019. We did not record a benefit for income taxes for the year ended December 31, 2019, in the unaudited pro forma condensed combined statement of operations since the Company has a valuation allowance recorded against its Federal and state deferred tax asset as of December 31, 2019.

(5)	Intangible Assets — We based our estimates of each intangible asset type/category that we expect to recognize as part of the CareCloud acquisition on the nature of the business and the fair value of contracts that we have entered into with the sellers. We based our estimates on experiences from our prior acquisitions and the types of intangible assets that we recognized as part of those acquisitions. In particular, our experience with our prior acquisitions indicates that customer contracts and customer relationships compose the significant majority of intangible assets for these types of businesses. We based the estimated useful lives of these intangible assets on the useful lives that we have experienced for similar intangible assets in prior acquisitions and on the nature of the assets.

			Estimated useful life
	(in thousands)
Customer relationships	$	8,900	4 years
Trademark		1,500	3 years
Software		6,000	3 years *
Goodwill		19,661
Total intangible assets	$	36,061

	MTBC			ETM			MTBC + Previously Acquired Subtotal			CareCloud			Pro Forma Adjustments			Pro Forma Combined
	(in thousands)
Net revenue	$	64,439		$	2,067		$	66,506		$	33,354		$	-		$	99,860

GAAP net loss	$	(872	)	$	(1,812	)	$	(2,684	)	$	(21,709	)	$	3,725		$	(20,668	)

Provision for income taxes		193			2			195			16			-			211
Net interest expense		121			-			121			4,212			(4,212	)		121
Foreign exchange / other expense		827			-			827			-			-			827
Stock-based compensation expense		3,215			-			3,215			-			-			3,215
Depreciation and amortization		3,006			20			3,026			3,208			1,219			7,453
Integration and transaction costs (1)		1,736			-			1,736			-			(732	)		1,004
Restructuring and impairment charges (2)		219			-			219			-			-			219
Change in contingent consideration		(344	)		-			(344	)		-			-			(344	)
Adjusted EBITDA	$	8,101		$	(1,790	)	$	6,311		$	(14,273	)	$	-		$	(7,962	)