Q4 and Full Year 2020 Results A leading healthcare technology company with a complete suite of proprietary, cloudbased solutions for healthcare providers NASDAQ Global Market: MTBC, MTBCP Safe Harbor Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such a ...

Forward-Looking Statements [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This section outlines the nature of forward-looking statements within the 10-K report, emphasizing that they are predictions subject to substantial known and unknown risks and uncertainties, including growth management, client retention, offshore operations, industry changes, regulatory compliance, and the impact of the COVID-19 pandemic - Forward-looking statements are predictions about future events, results of operations, or financial performance, identifiable by terms like 'may,' 'will,' 'expects,' 'plans,' 'believes,' 'estimates,' or 'potential'[10](index=10&type=chunk) - Key risks include managing growth and integrating acquisitions (Meridian Medical Management, CareCloud), retaining clients, maintaining cost-effective offshore operations in Pakistan and Sri Lanka, adapting to rapid healthcare industry changes, ensuring regulatory compliance, protecting data privacy and intellectual property, attracting and retaining key personnel, complying with debt covenants, competing effectively, and the impact of the COVID-19 pandemic[11](index=11&type=chunk)[12](index=12&type=chunk) - The company does not guarantee future results and is not obligated to update or revise forward-looking statements, except as required by law[13](index=13&type=chunk) Summary Risk Factors [Summary Risk Factors](index=5&type=section&id=Summary%20Risk%20Factors) This section provides a high-level overview of the principal risks that could materially impact the company's business, financial condition, and results of operations, categorized into risks related to acquisition strategy, business/industry/operations, regulatory compliance, and ownership of common/preferred stock - Risks related to acquisition strategy include ineffective growth management, potential liabilities from acquired entities, inability to complete future acquisitions, and dilutive issuances of equity or increased indebtedness[15](index=15&type=chunk) - Business, industry, and operational risks encompass the adverse effects of the COVID-19 pandemic, intense industry competition, failure to innovate or introduce new products, heavy reliance on offshore operations, changes in the healthcare industry affecting demand, customer churn, historical operating losses, variable sales/implementation cycles, loss of key personnel, and intellectual property protection challenges[16](index=16&type=chunk)[19](index=19&type=chunk) - Regulatory risks highlight the heavily regulated healthcare industry, potential non-compliance liabilities (e.g., HITECH Act, HIPAA, false claims), and the risk of employee misconduct like embezzlement or identity theft[18](index=18&type=chunk)[20](index=20&type=chunk) - Risks related to stock ownership include fluctuating revenues/operating results, potential dilution from future stock sales, significant control by Mahmud Haq (**34.3% common stock**), anti-takeover provisions, and limited voting rights/fixed dividends for Series A Preferred Stock holders[21](index=21&type=chunk)[22](index=22&type=chunk) PART I [Item 1. Business](index=7&type=section&id=Item%201.%20Business) MTBC, Inc. is a healthcare information technology company providing cloud-based solutions and business services to healthcare providers in the U.S., with offerings including RCM, PM, EHR, business intelligence, telehealth, and PXM solutions, supported by a cost-effective global workforce - MTBC provides a full suite of proprietary cloud-based solutions (SaaS) and related business services to healthcare providers and hospitals in the U.S., including Revenue Cycle Management (RCM), Practice Management (PM), Electronic Health Record (EHR), Business Intelligence, Telehealth, and Patient Experience Management (PXM)[24](index=24&type=chunk)[25](index=25&type=chunk) - The U.S. healthcare spending is projected to reach **$8.3 trillion by 2040**, with the healthcare IT market estimated at **$177 billion in 2019**, growing at a **12% CAGR for RCM**, **6% for EHR**, and **27% for Analytics/AI**[29](index=29&type=chunk)[31](index=31&type=chunk) - The company's business strategy focuses on providing comprehensive solutions, enhancing existing offerings, expanding into new categories/markets, growing its client base, strengthening client relationships, leveraging cost advantages from its global workforce (primarily in Pakistan and Sri Lanka), pursuing acquisitions, and developing a partner ecosystem[38](index=38&type=chunk)[40](index=40&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - As of December 31, 2020, MTBC served approximately **40,000 providers** across **2,600 independent medical practices and hospitals** in **80 specialties**, plus **200 non-medical practice clients**[64](index=64&type=chunk)[65](index=65&type=chunk) - MTBC has a competitive advantage due to its proprietary software automating workflows and a global team of **3,700 employees** (**3,100 offshore in Pakistan/Sri Lanka**) at significantly lower labor costs, enabling competitive pricing and industry consolidation[76](index=76&type=chunk)[78](index=78&type=chunk) [Overview](index=7&type=section&id=Overview) MTBC, Inc. is a healthcare information technology company offering a full suite of proprietary cloud-based solutions and related business services to healthcare providers and hospitals across the United States - MTBC, Inc. is a healthcare information technology company offering a full suite of proprietary cloud-based solutions and related business services to healthcare providers and hospitals across the United States[24](index=24&type=chunk) - The company's Software-as-a-Service (SaaS) platform includes revenue cycle management (RCM), practice management (PM), electronic health record (EHR), business intelligence, telehealth, and patient experience management (PXM) solutions[24](index=24&type=chunk)[25](index=25&type=chunk) - Solutions aim to improve financial and operational performance, streamline clinical workflows, enhance data insights, and reduce administrative burdens for clients[27](index=27&type=chunk) [Industry](index=7&type=section&id=Industry) The U.S. healthcare spending is projected to reach $8.3 trillion by 2040, with the healthcare IT market estimated at $177 billion in 2019, driven by a shift towards integrated, end-to-end systems - U.S. healthcare spending is projected to reach **$8.3 trillion by 2040**, with an average annual growth of **5.4% from 2021-2028**, outpacing GDP growth[29](index=29&type=chunk) US Healthcare IT Market Estimates (2019) | Segment | Market Size (approx.) | CAGR (approx.) | | :----------------------- | :-------------------- | :------------- | | US Healthcare IT Industry | $177 billion | - | | RCM | $87 billion | 12% | | North American EHR | $40 billion | 6% | | Analytics and AI | $30 billion | 27% | | Telehealth | $20 billion | 17% | - The market is shifting towards integrated, end-to-end systems, with standalone billing and practice management solutions declining[31](index=31&type=chunk) [Our Market Opportunity](index=8&type=section&id=Our%20Market%20Opportunity) The company is uniquely positioned to address evolving client needs, driven by the transition to complex value-based reimbursement models, increasing legislative and regulatory compliance requirements, rising health insurance costs, and accelerated digital transformation due to COVID-19 - The company is uniquely positioned to address evolving client needs, driven by the transition to complex value-based reimbursement models, increasing legislative and regulatory compliance requirements, rising health insurance costs, and accelerated digital transformation due to COVID-19[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) - Healthcare organizations are consolidating and investing in IT and data strategies, creating a continuous need for robust solutions to replace legacy tools and support future growth[36](index=36&type=chunk)[37](index=37&type=chunk) [Our Business Strategy](index=8&type=section&id=Our%20Business%20Strategy) The company's objective is to be a market-leading provider of integrated, end-to-end SaaS and business services solutions for healthcare organizations, achieved through comprehensive product suites, R&D, market expansion, client growth, and strategic acquisitions - Objective: To be a market-leading provider of integrated, end-to-end SaaS and business services solutions for healthcare organizations[38](index=38&type=chunk) - Strategies include providing comprehensive product suites, enhancing solutions through R&D and acquisitions, expanding into new categories/markets, growing the client base via sales/marketing, extending relationships with existing clients (upselling RCM services), strengthening client community, leveraging cost advantages from offshore workforce, pursuing strategic acquisitions, and developing a partner ecosystem[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) - The company plans to utilize its large data repository to provide clinical and process insights, aiming for frictionless information flow and care coordination[49](index=49&type=chunk) [Our Offerings](index=10&type=section&id=Our%20Offerings) The company's offerings are organized into four critical areas: Core Software Products, Tech-enabled & Business Services, Apps and App Ecosystem Partners, and On-demand Workforce, all designed to simplify claim reimbursement, reduce denial rates, and improve patient collections - Offerings are organized into four critical areas: Core Software Products (PM, EHR, PXM), Tech-enabled & Business Services (RCM, medical coding, credentialing), Apps and App Ecosystem Partners (BI, RPA, telemedicine, mobile apps), and On-demand Workforce (MTBC Force) for offshore engineering and RCM operations[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk)[55](index=55&type=chunk) - Integrated solutions aim to simplify claim reimbursement, reduce denial rates, improve accounts receivable days, and increase patient collections[57](index=57&type=chunk) - Pricing for complete, integrated solutions is typically a percentage of healthcare-related revenues, with a monthly minimum fee and a nominal one-time setup fee[59](index=59&type=chunk) [Additional Business Services](index=11&type=section&id=Additional%20Business%20Services) MTBC operates a Group Purchasing Organization (GPO) serving over 4,000 physician and mid-level provider members, negotiating discounts on pharmaceuticals and other products/services - MTBC operates a Group Purchasing Organization (GPO) serving over **4,000 physician and mid-level provider members**, negotiating discounts on pharmaceuticals and other products/services[60](index=60&type=chunk) [Research and Development](index=11&type=section&id=Research%20and%20Development) R&D focuses on enhancing and expanding service offerings, ensuring regulatory compliance, and continually updating software and technology infrastructure through an agile development life cycle, supported by both onshore and offshore teams - R&D focuses on enhancing and expanding service offerings, ensuring regulatory compliance, and continually updating software and technology infrastructure through an agile development life cycle[61](index=61&type=chunk)[62](index=62&type=chunk) - Teams are located both onshore and offshore, complemented by third-party technology providers for infrastructure and ecosystem connectivity[62](index=62&type=chunk) [Clients](index=11&type=section&id=Clients) As of December 31, 2020, the company served approximately 40,000 providers in 2,600 medical practices and hospitals across 80 specialties in 50 states, plus 200 non-medical practice clients, ranging from small independent practices to large enterprise medical groups and health systems - As of December 31, 2020, the company served approximately **40,000 providers** in **2,600 medical practices and hospitals** across **80 specialties** in **50 states**, plus **200 non-medical practice clients**[64](index=64&type=chunk)[65](index=65&type=chunk) - Client base ranges from small independent practices to large enterprise medical groups and health systems[66](index=66&type=chunk) [Sales and Marketing](index=11&type=section&id=Sales%20and%20Marketing) Sales and marketing efforts are aimed at driving growth in the client base, including small practices, large groups, and health systems, through direct sales, MTBC Force deals, partner initiatives, and marketing campaigns - Sales and marketing efforts are aimed at driving growth in the client base, including small practices, large groups, and health systems, through direct sales, MTBC Force deals, partner initiatives, and marketing campaigns[67](index=67&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [Our Growth Levers](index=12&type=section&id=Our%20Growth%20Levers) Growth is driven by organic sales, partnerships, and strategic acquisitions, leveraging the highly fragmented healthcare IT service industry for consolidation opportunities - Growth is driven by organic sales (segmented sales force, demand generation), partnerships (channel partners, integrated solutions), and acquisitions (**16 transactions since 2014**, leveraging technology and offshore teams for cost reduction and value delivery)[69](index=69&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - The healthcare IT service industry is highly fragmented, presenting significant opportunities for consolidation[72](index=72&type=chunk) [Competition](index=13&type=section&id=Competition) The market for practice management, EHR, and RCM solutions is highly competitive, with MTBC maintaining an advantage through competitive pricing, proprietary software, and a global team of over 3,700 employees, primarily offshore - The market for practice management, EHR, and RCM solutions is highly competitive, with rivals including larger healthcare IT companies (e.g., athenahealth, eClinicalWorks) and regional RCM firms[74](index=74&type=chunk)[75](index=75&type=chunk) - MTBC maintains a competitive advantage by delivering solutions at competitive prices, leveraging proprietary software for automation and a global team of over **3,700 employees** (**3,100 offshore**) with significantly lower labor costs[76](index=76&type=chunk)[78](index=78&type=chunk) - The company has a reputation for acquiring and transforming distressed competitors into profitable operations[77](index=77&type=chunk) [Employees](index=13&type=section&id=Employees) As of December 2020, the company employed approximately 3,700 full-time people worldwide, with anticipated increases tied to revenue growth or specific functional emphasis like marketing and sales - As of December 2020, the company employed approximately **3,700 full-time people worldwide**, with anticipated increases tied to revenue growth or specific functional emphasis like marketing and sales[78](index=78&type=chunk) [Voting Rights of Our Directors, Executive Officers, and Principal Stockholders](index=13&type=section&id=Voting%20Rights%20of%20Our%20Directors,%20Executive%20Officers,%20and%20Principal%20Stockholders) As of December 31, 2020, directors and executive officers held approximately 40% of both common stock shares and voting power, enabling them to control significant corporate decisions - As of December 31, 2020, directors and executive officers held approximately **40% of both common stock shares and voting power**, enabling them to control significant corporate decisions[79](index=79&type=chunk) [Corporate Information](index=13&type=section&id=Corporate%20Information) MTBC, Inc. was incorporated in Delaware on September 28, 2001, changed its name on February 6, 2019, and maintains its principal executive offices in Somerset, New Jersey - MTBC, Inc. was incorporated in Delaware on September 28, 2001, and changed its name from Medical Transcription Billing, Corp. on February 6, 2019. Its principal executive offices are in Somerset, New Jersey[80](index=80&type=chunk) [Where You Can Find More Information](index=14&type=section&id=Where%20You%20Can%20Find%20More%20Information) The company's website and the SEC's website provide free access to its SEC filings, including 10-K, 10-Q, and 8-K reports - The company's website (www.mtbc.com) provides access to SEC filings (10-K, 10-Q, 8-K) free of charge, and SEC filings are also available at the SEC's Public Reference Room or website (www.sec.gov)[84](index=84&type=chunk) [Item 1A. Risk Factors](index=14&type=section&id=Item%201A.%20Risk%20Factors) This section details the significant risks facing MTBC, categorized by acquisition strategy, business operations, regulatory environment, and stock ownership, including challenges in integrating acquisitions, the impact of the COVID-19 pandemic, intense competition, reliance on offshore operations, and the complex regulatory landscape - Acquisition strategy risks include difficulties in managing growth, retaining customers post-acquisition, potential liabilities from acquired entities (e.g., CareCloud's civil investigation), inability to secure future financing for acquisitions, and dilutive equity issuances or increased debt[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk)[94](index=94&type=chunk) - Business risks are significantly impacted by the COVID-19 pandemic, which caused patient volume decreases, potential revenue decline (**65% of revenue tied to customer collections**), and challenges in completing acquisitions. Other risks include intense competition, failure to innovate, heavy dependence on cost-effective offshore operations (Pakistan, Sri Lanka), changes in healthcare industry demand, customer churn, and historical operating losses[95](index=95&type=chunk)[97](index=97&type=chunk)[101](index=101&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk)[107](index=107&type=chunk)[109](index=109&type=chunk)[112](index=112&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - Regulatory risks stem from the heavily regulated healthcare industry, including potential non-compliance with federal and state laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA, HITECH Act), which could lead to liabilities, adverse publicity, and penalties, with evolving telehealth regulations also posing risks[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - Risks related to common stock ownership include revenue/operating result fluctuations, potential market price depression from future stock sales, and significant control by Executive Chairman Mahmud Haq (**34.3% ownership**); preferred stock risks include junior ranking to debt, potential inability to pay dividends due to loan covenants or insufficient cash, and limited voting rights[204](index=204&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[222](index=222&type=chunk)[224](index=224&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) [Risks Related to Our Acquisition Strategy](index=14&type=section&id=Risks%20Related%20to%20Our%20Acquisition%20Strategy) Ineffective management of growth, customer churn post-acquisition, potential liabilities from acquired entities, and challenges in financing future acquisitions pose significant risks to the company's revenue and operating results - Ineffective management of growth, including integration of acquired businesses (Meridian, CareCloud), can harm revenue and operating results[85](index=85&type=chunk) - Acquisitions may lead to customer churn, especially if non-competition clauses are unenforceable, resulting in revenue decreases[86](index=86&type=chunk) - The company may incur liabilities from acquired businesses' creditors, customers, and shareholders, despite due diligence and indemnities[87](index=87&type=chunk) - The CareCloud acquisition involved a civil investigation into pre-acquisition regulatory compliance, with a potential settlement covered by escrowed funds, but an unfavorable outcome could materially affect the company[89](index=89&type=chunk) - Future acquisitions may be difficult to implement due to financing challenges, competition, and the risk of not achieving anticipated cost savings or cross-selling opportunities[90](index=90&type=chunk)[91](index=91&type=chunk) - Acquisitions can result in dilutive equity issuances, increased debt, assumed liabilities, and higher amortization expenses[94](index=94&type=chunk) [Risks Related to Our Business](index=15&type=section&id=Risks%20Related%20to%20Our%20Business) The company faces significant business risks, including the negative impact of the COVID-19 pandemic on revenue, intense competition, reliance on offshore operations, and the challenge of maintaining profitability amidst industry changes and intellectual property protection issues - The COVID-19 pandemic has negatively impacted business, financial condition, and growth, causing patient volume decreases and potential revenue decline (**65% of revenue tied to customer collections**)[95](index=95&type=chunk)[97](index=97&type=chunk) - The company operates in a highly competitive industry with larger, more resourced competitors, risking adverse effects on revenue, growth, and market share[103](index=103&type=chunk)[104](index=104&type=chunk) - Failure to introduce new products or keep pace with technological advances could lead to customer loss and hinder business growth[105](index=105&type=chunk) - Heavy dependence on offshore operations in Pakistan and Sri Lanka (**3,100 employees, 98% in Pakistan**) for cost-effective services means any disruption could severely impact the business[107](index=107&type=chunk)[109](index=109&type=chunk) - Changes in the healthcare industry, such as provider consolidation or healthcare reform (e.g., ACA revisions), could reduce demand for services and decrease revenues[112](index=112&type=chunk)[113](index=113&type=chunk) - The company has incurred net losses of **$8.8 million in 2020** and **$872,000 in 2019**, and may not achieve or maintain profitability due to acquisition costs and increased operating expenses[118](index=118&type=chunk)[119](index=119&type=chunk) - Loss of key management, particularly Mahmud Haq, could harm the business due to his instrumental role in offshore operations[133](index=133&type=chunk)[134](index=134&type=chunk) - Inability to protect intellectual property rights or claims of infringement by others could lead to significant costs, litigation, and business disruption[135](index=135&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk)[147](index=147&type=chunk) - Proprietary or acquired software platforms may not operate properly, leading to reputational damage, liability claims, and diversion of resources[149](index=149&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk) - Security breaches or failures in protecting customer data could lead to significant liabilities, reduced customer confidence, and reputational harm[157](index=157&type=chunk)[158](index=158&type=chunk) - Disruptions in internet/telecommunication services or damage to data centers could adversely affect business reliability and customer confidence[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) [Regulatory Risks](index=27&type=section&id=Regulatory%20Risks) The heavily regulated healthcare industry, with complex and evolving laws, poses significant compliance risks, potentially leading to liabilities, adverse publicity, and penalties, particularly concerning data privacy, false claims, and employee misconduct - The heavily regulated healthcare industry, with complex and evolving laws (e.g., Anti-Kickback Statute, False Claims Act, Stark Law), poses significant compliance risks, potentially leading to liability, adverse publicity, and negative business impact[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk)[184](index=184&type=chunk) - Failure to maintain EHR solution certification under the HITECH Act could adversely affect business, financial condition, and results of operations[188](index=188&type=chunk)[190](index=190&type=chunk) - Breaches of personal data protected by HIPAA or the HITECH Act could result in significant civil and criminal liabilities, including penalties up to **$1.5 million per incident**[191](index=191&type=chunk)[193](index=193&type=chunk)[194](index=194&type=chunk) - Non-compliance with federal and state laws governing false claims or financial relationships among healthcare providers could lead to civil/criminal penalties or loss of eligibility for government programs[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk) - Potential healthcare reform and new regulatory requirements could increase costs, delay new product introductions, or impair existing services[199](index=199&type=chunk)[200](index=200&type=chunk) - Additional regulation on medical information disclosure outside the U.S. could adversely affect offshore operations and increase costs[201](index=201&type=chunk)[202](index=202&type=chunk) - Services involving handling patient payments and data present potential for embezzlement, identity theft, or other illegal behavior by employees, leading to liability and reputational damage[203](index=203&type=chunk) [Risks Related to Ownership of Shares of Our Common Stock](index=30&type=section&id=Risks%20Related%20to%20Ownership%20of%20Shares%20of%20Our%20Common%20Stock) Fluctuations in revenues, potential dilution from future stock sales, significant control by the Executive Chairman, anti-takeover provisions, and the absence of cash dividends pose risks to common stockholders - Fluctuations in revenues, operating results, and cash flows may cause the common stock price to decline if investor expectations are not met[204](index=204&type=chunk)[205](index=205&type=chunk) - Future sales of a substantial number of common stock shares could depress the market price[207](index=207&type=chunk) - Mahmud Haq, the founder and Executive Chairman, controls **34.3% of outstanding common stock**, preventing other investors from influencing significant corporate decisions and potentially delaying or preventing a change of control[208](index=208&type=chunk)[209](index=209&type=chunk) - Provisions of Delaware law and the company's charter/bylaws may make a takeover more difficult, potentially causing the common stock price to decline[210](index=210&type=chunk)[211](index=211&type=chunk) - Future issuances of additional preferred stock could dilute the rights of existing common stockholders[212](index=212&type=chunk) - The company does not intend to pay cash dividends on common stock, making capital appreciation the sole source of gain for stockholders[213](index=213&type=chunk) - Complying with public company laws and regulations (e.g., Sarbanes-Oxley Act Section 404) increases costs and management demands, potentially harming operating results and investor perception if deficiencies are found[214](index=214&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - As a smaller reporting company, reduced disclosure requirements may make common stock less attractive to investors, leading to a less active trading market and higher stock price volatility[219](index=219&type=chunk)[220](index=220&type=chunk) [Risks Related to Ownership of Shares of Our Preferred Stock](index=33&type=section&id=Risks%20Related%20to%20Ownership%20of%20Shares%20of%20Our%20Preferred%20Stock) Ownership of Series A Preferred Stock carries risks including junior ranking to debt, potential inability to pay dividends due to loan covenants or insufficient cash, dilution from future issuances, market interest rate sensitivity, limited voting rights, and no conversion to common stock - Series A Preferred Stock ranks junior to all company indebtedness and other liabilities, meaning assets would first pay creditors in bankruptcy or liquidation[222](index=222&type=chunk) - The company may be unable to pay dividends on Series A Preferred Stock if it falls out of compliance with loan covenants (e.g., SVB Credit Agreement) or has insufficient cash[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) - Issuance of additional preferred stock (pari passu or senior) could dilute existing Series A Preferred Stock holders' rights to dividends or liquidation amounts[227](index=227&type=chunk)[228](index=228&type=chunk)[230](index=230&type=chunk) - Market interest rates can materially and adversely affect the value of Series A Preferred Stock, as higher rates may lead to expectations of higher dividend yields[232](index=232&type=chunk) - Holders of Series A Preferred Stock may not be eligible for the dividends-received deduction or preferential tax rates if the company lacks sufficient current or accumulated earnings and profits[233](index=233&type=chunk)[234](index=234&type=chunk) - The company may redeem Series A Preferred Stock at any time, potentially if market conditions allow for lower-rate financing, ending dividend accrual and holder rights[237](index=237&type=chunk) - The market price of Series A Preferred Stock is variable and influenced by factors like interest rates, dividend history, economic conditions, and company performance[238](index=238&type=chunk) - Series A Preferred Stock holders have extremely limited voting rights, primarily for electing directors if dividends are in arrears or for certain charter amendments[239](index=239&type=chunk)[240](index=240&type=chunk) - The Series A Preferred Stock is not convertible into common stock, so investors will not realize upside from increases in common stock price[242](index=242&type=chunk)[243](index=243&type=chunk) [Item 1B. Unresolved Staff Comments](index=36&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reported no unresolved staff comments from the SEC - There are no unresolved staff comments[244](index=244&type=chunk) [Item 2. Properties](index=36&type=section&id=Item%202.%20Properties) MTBC's corporate headquarters are in Somerset, New Jersey, occupying 2,400 square feet, with approximately 190,000 square feet leased across 19 U.S. locations and additional offshore facilities in Pakistan and Sri Lanka, all deemed adequate by management - Corporate headquarters: **2,400 sq ft** in Somerset, New Jersey (month-to-month lease)[245](index=245&type=chunk) - U.S. leased space: Approximately **190,000 sq ft** across **19 locations**, including five pediatric offices (leases expiring 2021-2026); a new **8,000 sq ft pediatric office in Ohio** was leased in February 2021 for **15 years**[245](index=245&type=chunk) - Offshore leased space: Approximately **48,000 sq ft in Islamabad, Pakistan** (lease expires July 2021), and **33,000 sq ft in Bagh, Pakistan** (annually renewable lease); office space in Sri Lanka (lease expires March 2021, to be renewed)[246](index=246&type=chunk) - Management believes current facilities are adequate and suitable additional space will be available[247](index=247&type=chunk) [Item 3. Legal Proceedings](index=36&type=section&id=Item%203.%20Legal%20Proceedings) MTBC is involved in an arbitration with Randolph Pain Relief and Wellness Center (RPRWC) where MTBC Acquisition Corp. (MAC) is defending against claims of up to $11 million, and a civil investigation related to the CareCloud acquisition is ongoing, with an estimated $4.2 million settlement covered by a $4 million escrow - Randolph Pain Relief and Wellness Center (RPRWC) filed an arbitration demand against MTBC, Inc. and MTBC Acquisition Corp. (MAC) for alleged breach of a billing services agreement by an acquired subsidiary, Millennium Practice Management Associates, Inc. (MPMA)[248](index=248&type=chunk) - The Chancery Court ruled that MTBC, Inc. cannot be compelled to participate in the arbitration, but MAC is required to; RPRWC's claimed damages have varied, from **$6.6 million to $20 million**, and then an estimated **$11 million plus costs**; MAC intends to vigorously defend, anticipating a substantially lower award[249](index=249&type=chunk)[250](index=250&type=chunk) - A civil investigation related to CareCloud Corporation's acquired software technology is ongoing, with an estimated **$4.2 million settlement** (including costs) expected to be substantially covered by a **$4 million escrow** from the acquisition[89](index=89&type=chunk)[559](index=559&type=chunk) - Management believes no current legal proceedings, individually or collectively, would have a material adverse effect on the company's business, consolidated results of operations, financial position, or cash flows[253](index=253&type=chunk) [Item 4. Mine Safety Disclosures](index=37&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no disclosures related to mine safety - There are no mine safety disclosures[254](index=254&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=37&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) MTBC's common stock trades on the Nasdaq Global Market under 'MTBC' since July 2014, with approximately 6,800 common stockholders as of February 2021; the company has not declared cash dividends and is prohibited from doing so without senior lender consent, with no unregistered securities sold or equity repurchased in Q4 2020 - MTBC common stock has been listed on the Nasdaq Global Market under the symbol 'MTBC' since **July 23, 2014**[255](index=255&type=chunk) - As of **February 8, 2021**, there were approximately **6,800 holders of record** of the company's common stock[256](index=256&type=chunk) - The company has not declared cash dividends on common stock since going public and does not anticipate paying any in the foreseeable future, being prohibited without prior written consent from its senior lender, SVB[257](index=257&type=chunk) - No unregistered equity securities were sold, and no share repurchase activity occurred during the three months ended December 31, 2020[258](index=258&type=chunk)[259](index=259&type=chunk) Equity Compensation Plan Information (as of December 31, 2020) | Plan Category | Number of securities to be issued upon vesting | Number of securities remaining available for future issuance | | :------------------------------------------------ | :--------------------------------------------- | :----------------------------------------------------------- | | Equity compensation plan approved by security holders - common shares | 369,436 | 1,718,012 | | Equity compensation plan approved by security holders - preferred shares | 44,000 | 370,075 | | **Total** | **413,436** | **2,088,087** | [Item 6. Selected Financial Data](index=38&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents selected consolidated financial data for MTBC, Inc. for the years ended December 31, 2016-2020, including statements of operations and balance sheet data, and a reconciliation of GAAP net loss to Adjusted EBITDA, highlighting significant increases in revenue and expenses due to recent acquisitions Consolidated Statements of Operations Data (Selected, in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :----------------------------------- | :---------- | :--------- | :--------- | :--------- | :--------- | | Net revenue | $105,122 | $64,439 | $50,546 | $31,811 | $24,493 | | Total operating expenses | $113,393 | $64,372 | $53,085 | $36,333 | $32,394 | | Operating (loss) income | $(8,271) | $67 | $(2,539) | $(4,522) | $(7,901) | | Net loss | $(8,813) | $(872) | $(2,138) | $(5,565) | $(8,797) | | Preferred stock dividend | $13,877 | $6,386 | $4,824 | $2,030 | $753 | | Net loss attributable to common shareholders | $(22,690) | $(7,258) | $(6,962) | $(7,595) | $(9,550) | | Net loss per common share (basic and diluted) | $(1.79) | $(0.60) | $(0.59) | $(0.69) | $(0.95) | Consolidated Balance Sheet Data (Selected, as of December 31, in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :------------------- | :---------- | :--------- | :--------- | :--------- | :--------- | | Cash | $20,925 | $19,994 | $14,472 | $4,362 | $3,477 | | Working capital - net | $15,795 | $19,823 | $17,916 | $4,608 | $(7,418) | | Total assets | $137,999 | $56,402 | $47,623 | $25,526 | $28,324 | | Long-term debt | $41 | $83 | $222 | $121 | $4,200 | | Shareholders' equity | $101,245 | $42,837 | $38,870 | $20,250 | $7,067 | Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Metric | 2020 | 2019 | 2018 | 2017 | 2016 | | :----------------------------------- | :---------- | :--------- | :--------- | :--------- | :--------- | | Net loss | $(8,813) | $(872) | $(2,138) | $(5,565) | $(8,797) | | Depreciation | $1,354 | $909 | $689 | $634 | $527 | | Amortization | $8,551 | $2,097 | $2,165 | $3,666 | $4,581 | | Interest expense - net | $446 | $121 | $250 | $1,307 | $646 | | Income tax provision (benefit) | $103 | $193 | $(157) | $68 | $197 | | Stock-based compensation expense | $6,502 | $3,216 | $2,464 | $1,487 | $1,928 | | Transaction and integration costs | $2,694 | $1,735 | $1,891 | $515 | $976 | | Restructuring, impairment and unoccupied lease charges | $963 | $219 | - | $276 | - | | Change in contingent consideration | $(1,000) | $(344) | $73 | $152 | $(716) | | **Adjusted EBITDA** | **$10,871** | **$8,101** | **$4,802** | **$2,291** | **$(605)** | - Adjusted EBITDA is a non-GAAP financial measure used by management to evaluate profitability and efficiency, excluding income tax, interest, foreign exchange, stock-based compensation, depreciation, amortization, transaction/integration costs, restructuring, and changes in contingent consideration[267](index=267&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a detailed analysis of MTBC's financial condition and results of operations for 2020 and 2019, covering revenue sources, operating expenses, key performance measures, and liquidity, highlighting significant revenue growth driven by acquisitions, increased operating expenses, and a net loss, with liquidity enhanced by preferred stock offerings despite negative cash flow from operations - Net revenue increased by **$40.7 million (63%) to $105.1 million in 2020** from **$64.4 million in 2019**, with **$53.3 million from CareCloud and Meridian acquisitions**[323](index=323&type=chunk) - Operating expenses increased by **$49.0 million (76%) to $113.4 million in 2020**, primarily due to acquisitions, leading to an operating loss of **$8.3 million in 2020** compared to operating income of **$67,000 in 2019**[323](index=323&type=chunk)[325](index=325&type=chunk) - Net loss was **$8.8 million in 2020**, up from **$872,000 in 2019**, largely due to increased non-cash amortization expense (**$8.1 million in 2020 vs. $1.9 million in 2019**)[118](index=118&type=chunk) Adjusted EBITDA and Operating Income (in thousands) | Metric | 2020 | 2019 | | :------------------------- | :---------- | :--------- | | Adjusted EBITDA | $10,871 | $8,101 | | Non-GAAP adjusted operating income | $9,015 | $6,770 | | Non-GAAP adjusted operating margin | 8.6% | 10.5% | - Cash used in operating activities was **$892,000 in 2020**, compared to cash generated of **$7.6 million in 2019**, including **$10.3 million used to pay acquisition-related obligations in 2020**[345](index=345&type=chunk)[350](index=350&type=chunk) - Cash provided by financing activities was **$33.4 million in 2020**, primarily from issuing **1,932,000 shares of Preferred Stock for $44.5 million**, offset by **$11.4 million in Preferred Stock dividends**[345](index=345&type=chunk)[354](index=354&type=chunk) - The company had **$20.9 million in cash** and **$15.8 million in positive working capital** at year-end 2020, with management forecasting sufficient liquidity for the next twelve months[343](index=343&type=chunk)[346](index=346&type=chunk) [Overview](index=41&type=section&id=Overview) MTBC is a healthcare IT company providing cloud-based RCM, PM, EHR, business intelligence, telehealth, and PXM solutions to U.S. healthcare providers and hospitals, leveraging cost-effective offshore operations in Pakistan and Sri Lanka - MTBC is a healthcare IT company providing cloud-based RCM, PM, EHR, business intelligence, telehealth, and PXM solutions to U.S. healthcare providers and hospitals[273](index=273&type=chunk) - Offshore operations in Pakistan and Sri Lanka accounted for approximately **10% of total expenses in 2020** (**14% in 2019**), with personnel-related costs being significantly lower than in the U.S., providing a competitive advantage and enabling cost reductions post-acquisition[275](index=275&type=chunk) [Key Performance Measures](index=42&type=section&id=Key%20Performance%20Measures) Management utilizes non-GAAP financial measures such as Adjusted EBITDA, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income, and Adjusted Net Income Per Share to evaluate performance and provide additional insight, excluding various non-cash and non-recurring items - Management uses non-GAAP financial measures like Adjusted EBITDA, Adjusted Operating Income, Adjusted Operating Margin, Adjusted Net Income, and Adjusted Net Income Per Share to evaluate performance and provide additional insight[277](index=277&type=chunk)[279](index=279&type=chunk) - Adjusted EBITDA excludes income tax, interest, foreign exchange, stock-based compensation, depreciation, amortization, integration costs, restructuring charges, and changes in contingent consideration[280](index=280&type=chunk) Adjusted EBITDA (in thousands) | Metric | 2020 | 2019 | | :---------------- | :---------- | :--------- | | GAAP net loss | $(8,813) | $(872) | | Adjustments | $19,684 | $8,973 | | **Adjusted EBITDA** | **$10,871** | **$8,101** | Adjusted Operating Income and Margin (in thousands) | Metric | 2020 | 2019 | | :------------------------- | :---------- | :--------- | | GAAP operating (loss) / income | $(8,271) | $67 | | Adjustments | $17,286 | $6,703 | | **Non-GAAP adjusted operating income** | **$9,015** | **$6,770** | | **Non-GAAP adjusted operating margin** | **8.6%** | **10.5%** | Non-GAAP Adjusted Net Income and EPS | Metric | 2020 | 2019 | | :----------------------------------- | :---------- | :--------- | | GAAP net loss | $(8,813) | $(872) | | Adjustments | $17,257 | $7,610 | | **Non-GAAP adjusted net income** | **$8,459** | **$6,738** | | Non-GAAP adjusted earnings per share | $0.63 | $0.55 | | Non-GAAP adjusted diluted earnings per share | $0.50 | $0.53 | [Quarterly Results of Operations](index=45&type=section&id=Quarterly%20Results%20of%20Operations) This section presents the company's quarterly net revenue, net income (loss), and Adjusted EBITDA for the periods ending December 31, 2020, and December 31, 2019 Quarterly Net Revenue (in thousands) | Quarter | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | | :---------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net revenue | $32,037 | $31,639 | $19,579 | $21,867 | $15,758 | $16,851 | $16,750 | $15,080 | Quarterly Net Income (Loss) and Adjusted EBITDA (in thousands) | Quarter | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | | :---------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | :----------- | | Net income (loss) | $155 | $(1,674) | $(4,791) | $(2,503) | $333 | $(139) | $(771) | $(295) | | Adjusted EBITDA | $5,702 | $4,213 | $191 | $765 | $2,786 | $2,594 | $1,141 | $1,580 | [Key Metrics](index=46&type=section&id=Key%20Metrics) As of December 31, 2020, the company served approximately 40,000 providers across 2,600 practices, demonstrating an 88% customer renewal rate in 2020 - As of December 31, 2020, the company served approximately **40,000 providers** across **2,600 practices**, an increase from **10,500 providers and 1,800 practices in 2019**[290](index=290&type=chunk) - Customer renewal rates were **88% in 2020** and **90% in 2019**, measuring the percentage of RCM clients utilizing the technology platform who remained clients throughout the year[291](index=291&type=chunk) [Sources of Revenue](index=46&type=section&id=Sources%20of%20Revenue) Primary revenue is derived from revenue cycle management (RCM) services and bundled services, typically billed as a percentage of customer collections, with other contributions from SaaS fees, printing/mailing, clearinghouse, EDI, ancillary RCM, group purchasing, and practice management services - Primary revenue is derived from revenue cycle management (RCM) services and bundled services (including EHR and PM software), typically billed as a percentage of customer collections[292](index=292&type=chunk) Revenue Contribution by Source | Revenue Source | 2020 Revenue (%) | 2019 Revenue (%) | | :------------------------------------------- | :--------------- | :--------------- | | RCM and bundled services | 62% | 66% | | Software-as-a-service (SaaS) fees (standalone) | 18% | 1% | | Printing and mailing operations, clearinghouse, EDI, ancillary RCM | 6% | 8% | | Group purchasing services | 1% | 2% | | Practice management services | 11% | 21% | - Telehealth services, launched in December 2019, generated approximately **$7,000 in revenue in 2020**, included within RCM services[297](index=297&type=chunk) [Operating Expenses](index=48&type=section&id=Operating%20Expenses) Operating expenses include direct operating costs, selling and marketing, general and administrative, research and development, changes in contingent consideration, depreciation and amortization, and restructuring charges, with offshore operations contributing to cost efficiency - Direct operating costs primarily consist of salaries, benefits, claims processing, and other direct service costs; offshore operations accounted for **10% of direct operating costs in 2020** (**13% in 2019**)[298](index=298&type=chunk) - Selling and marketing expenses include compensation, commissions, travel, and advertising; Research and development expenses are mainly personnel-related and third-party contractor costs[299](index=299&type=chunk) - General and administrative expenses cover administrative salaries, benefits, travel, occupancy, insurance, software license fees, and professional fees; offshore offices accounted for **15% of G&A in 2020** (**16% in 2019**)[300](index=300&type=chunk) - Contingent consideration is adjusted to fair value each period, reflecting changes in forecasted revenue of acquired entities[301](index=301&type=chunk) - Depreciation is calculated straight-line over **3-5 years**; amortization for most intangible assets is over **3-4 years**, while practice management client value is amortized over **12 years**[302](index=302&type=chunk) - Restructuring, impairment, and unoccupied lease charges relate to unused facilities and vacant space, with one lease obligation settled in February 2021[303](index=303&type=chunk) [Interest and Other Income (Expense)](index=48&type=section&id=Interest%20and%20Other%20Income%20(Expense)) Interest expense includes costs related to the working capital line of credit and acquisition amounts, offset by interest income, while other income (expense) primarily results from foreign currency transaction gains/losses - Interest expense includes costs related to the working capital line of credit and acquisition amounts, offset by interest income; other income (expense) primarily results from foreign currency transaction gains/losses[304](index=304&type=chunk) [Income Taxes](index=49&type=section&id=Income%20Taxes) Income taxes are estimated based on current tax exposure and temporary differences, resulting in deferred tax assets and liabilities, with a valuation allowance recorded against all deferred tax assets due to historical losses and uncertainty regarding future U.S. taxable income - Income taxes are estimated based on current tax exposure and temporary differences, resulting in deferred tax assets and liabilities; a valuation allowance is recorded against all deferred tax assets due to historical losses and uncertainty regarding future U.S. taxable income[306](index=306&type=chunk) - The company accounts for Global Intangible Low-Taxed Income (GILTI) provisions as incurred[306](index=306&type=chunk) [Critical Accounting Policies and Estimates](index=49&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies requiring significant judgment and estimates include revenue from contracts with customers (especially RCM), contingent consideration, goodwill impairment, and business combinations, with revenue recognition for RCM services involving estimation of variable consideration - Key accounting policies requiring significant judgment and estimates include revenue from contracts with customers (especially RCM), contingent consideration, goodwill impairment, and business combinations[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) - Revenue recognition for RCM services involves estimating variable consideration (payment-to-charge ratios, billing rates, payment periods) and is recognized over the performance period using the input method[309](index=309&type=chunk)[311](index=311&type=chunk)[314](index=314&type=chunk) - Goodwill is tested for impairment annually (October 31) at the reporting-unit level (Healthcare IT and Practice Management), using discounted cash flow and market approaches, with no impairment recorded in 2020 or 2019[318](index=318&type=chunk) - Business combinations are accounted for using the acquisition method, recording acquired assets and assumed liabilities at fair value, with goodwill representing the excess purchase price[319](index=319&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) This section presents the consolidated results of operations as a percentage of total revenue for 2020 and 2019, detailing the proportional contribution and changes in various revenue and expense categories Consolidated Results of Operations as a Percentage of Total Revenue | Metric | 2020 | 2019 | | :--------------------------------------- | :---------- | :---------- | | Net revenue | 100.0% | 100.0% | | Direct operating costs | 61.7% | 63.9% | | Selling and marketing | 6.3% | 2.4% | | General and administrative | 21.7% | 27.8% | | Research and development | 8.9% | 1.4% | | Change in contingent consideration | (1.0)% | (0.5)% | | Depreciation and amortization | 9.4% | 4.7% | | Restructuring, impairment and unoccupied lease charges | 0.9% | 0.3% | | Total operating expenses | 107.9% | 100.0% | | Operating (loss) income | (7.9)% | 0.0% | | Interest expense - net | 0.4% | 0.2% | | Other income (expense) - net | 0.0% | (1.0)% | | Loss before income taxes | (8.3)% | (1.2)% | | Income tax provision | 0.1% | 0.3% | | Net loss | (8.4)% | (1.5)% | [Comparison of 2020 and 2019](index=51&type=section&id=Comparison%20of%202020%20and%202019) Net revenue increased by $40.7 million (63%) in 2020, primarily due to acquisitions, while total operating expenses surged by $49.0 million (76%), driven by higher direct operating costs, selling and marketing, R&D, and amortization expenses Revenue and Operating Expenses Comparison (in thousands) | Metric | 2020 | 2019 | Change Amount | Change Percent | | :--------------------------------------- | :---------- | :---------- | :------------ | :------------- | | Net revenue | $105,122 | $64,439 | $40,683 | 63% | | Direct operating costs | $64,821 | $41,186 | $23,635 | 57% | | Selling and marketing | $6,582 | $1,522 | $5,060 | 332% | | General and administrative | $22,811 | $17,912 | $4,899 | 27% | | Research and development | $9,311 | $871 | $8,440 | 969% | | Change in contingent consideration | $(1,000) | $(344) | $(656) | 191% | | Depreciation | $1,354 | $909 | $445 | 49% | | Amortization | $8,551 | $2,097 | $6,454 | 308% | | Restructuring, impairment and unoccupied lease charges | $963 | $219 | $744 | 340% | | Total operating expenses | $113,393 | $64,372 | $49,021 | 76% | - Net revenue growth in 2020 was significantly driven by **$53.3 million from CareCloud and Meridian acquisitions**[323](index=323&type=chunk) - Direct operating costs increased due to higher salary costs (**$12.2 million**) from acquisitions, outsourcing, and facility costs[325](index=325&type=chunk) - Selling and marketing expense surged by **332%** due to increased emphasis post-CareCloud acquisition; R&D expense increased by **969%** for new product development related to CareCloud and Meridian technologies[326](index=326&type=chunk)[328](index=328&type=chunk) - Amortization expense increased by **308%** due to intangible assets acquired from CareCloud and Meridian[331](index=331&type=chunk) Interest and Income Tax Comparison (in thousands) | Metric | 2020 | 2019 | Change Amount | Change Percent | | :------------------------- | :---------- | :---------- | :------------ | :------------- | | Interest income | $42 | $262 | $(220) | (84)% | | Interest expense | $(488) | $(383) | $(105) | 27% | | Other income (expense) - net | $7 | $(625) | $632 | 101% | | Income tax provision | $103 | $193 | $(90) | 47% | - Interest income decreased due to lower earnings on temporary cash investments; other income (expense) shifted from a net expense to a net income, primarily due to foreign currency transaction gains[334](index=334&type=chunk)[336](index=336&type=chunk) - A valuation allowance was recorded against all deferred tax assets due to historical losses and uncertainty regarding future U.S. taxable income[338](index=338&type=chunk) - As of December 31, 2020, the company had a total federal NOL carryforward of **$270.9 million**, with **$237.6 million from CareCloud and Meridian acquisitions** subject to Section 382 limitations[341](index=341&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2020, the company had $20.9 million in cash and $15.8 million in positive working capital, despite negative cash flow from operations of $892,000 for the year, with liquidity enhanced by $44.5 million in net proceeds from Preferred Stock issuances - As of December 31, 2020, the company had **$20.9 million in cash** and **$15.8 million in positive working capital**, despite negative cash flow from operations of **$892,000 for the year**[343](index=343&type=chunk) - Cash used by operations in 2020 included **$10.3 million for outstanding obligations** from CareCloud and Meridian acquisitions[343](index=343&type=chunk) - The company raised **$44.5 million in net proceeds** from issuing **1,932,000 shares of Preferred Stock in 2020**, and **$9.6 million from 373,000 shares in 2019**[343](index=343&type=chunk) Cash Flows Summary (in thousands) | Cash Flow Activity | 2020 | 2019 | Change Amount | Change Percent | | :--------------------------------- | :---------- | :--------- | :------------ | :------------- | | Net cash (used in) provided by operating activities | $(892) | $7,618 | $(8,510) | (112)% | | Net cash used in investing activities | $(31,469) | $(4,158) | $(27,311) | (657)% | | Net cash provided by financing activities | $33,422 | $1,422 | $32,000 | 2,250% | | Effect of exchange rate changes on cash | $(130) | $640 | $(770) | (120)% | | Net increase in cash | $931 | $5,522 | $(4,591) | (83)% | - Management expects sufficient liquidity for the next twelve months through continued focus on profitability, revenue growth, and expense management[346](index=346&type=chunk) - The company estimates a **$4.2 million payment in 2021** to resolve a civil investigation related to an acquired subsidiary, with **$4.0 million from escrowed preferred stock**[349](index=349&type=chunk) [Operating Activities](index=54&type=section&id=Operating%20Activities) Cash used by operating activities was $892,000 in 2020, a decrease from $7.6 million generated in 2019, primarily due to a $7.9 million increase in net loss, including higher non-cash depreciation and amortization and stock-based compensation - Cash used by operating activities was **$892,000 in 2020**, a decrease from **$7.6 million generated in 2019**, primarily due to a **$7.9 million increase in net loss**, including higher non-cash depreciation and amortization (**$7.1 million**) and stock-based compensation (**$3.3 million**)[350](index=350&type=chunk) - Accounts payable, accrued compensation, and accrued expenses increased by **$11.9 million in 2020**, compared to **$1.4 million in 2019**, with cash used for pre-acquisition obligations shown as operating cash outflow[352](index=352&type=chunk) [Investing Activities](index=55&type=section&id=Investing%20Activities) Cash used in investing activities increased by $27.3 million to $31.5 million in 2020, primarily due to $23.7 million paid for CareCloud and Meridian acquisitions, and higher capitalized software costs - Cash used in investing activities increased by **$27.3 million to $31.5 million in 2020**, primarily due to **$23.7 million paid for CareCloud and Meridian acquisitions**, compared to **$1.6 million for ETM in 2019**[353](index=353&type=chunk) - Capitalized software costs were **$5.2 million in 2020**, up from **$538,000 in 2019**[353](index=353&type=chunk) [Financing Activities](index=55&type=section&id=Financing%20Activities) Cash provided by financing activities was $33.4 million in 2020, a significant increase from $1.4 million in 2019, primarily driven by $44.5 million net proceeds from Preferred Stock issuance, offset by $11.4 million in Preferred Stock dividends and $2.2 million in tax withholding obligations - Cash provided by financing activities was **$33.4 million in 2020**, a significant increase from **$1.4 million in 2019**[354](index=354&type=chunk) - This includes **$44.5 million net proceeds from Preferred Stock issuance**, offset by **$11.4 million in Preferred Stock dividends** and **$2.2 million in tax withholding obligations**[354](index=354&type=chunk) - No borrowings were outstanding under the revolving line of credit as of December 31, 2020 and 2019[354](index=354&type=chunk) [Contractual Obligations and Commitments](index=55&type=section&id=Contractual%20Obligations%20and%20Commitments) The company has contractual obligations under its line of credit and operating leases for property and equipment, and was in compliance with all SVB covenants in 2020 - The company has contractual obligations under its line of credit and operating leases for property and equipment, and was in compliance with all SVB covenants in 2020[355](index=355&type=chunk) [Off-Balance Sheet Arrangements](index=55&type=section&id=Off-Balance%20Sheet%20Arrangements) As of December 31, 2020 and 2019, the company had no relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements, though a variable interest entity (VIE), talkMD Clinicians, PA, was formed in Q1 2020 to provide telehealth services - As of December 31, 2020 and 2019, the company had no relationships with unconsolidated entities or financial partnerships for off-balance sheet arrangements[356](index=356&type=chunk) - A variable interest entity (VIE), talkMD Clinicians, PA, was formed in Q1 2020 to provide telehealth services, controlled by the company but had not commenced operations or transactions by year-end 2020[356](index=356&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=55&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, MTBC is exempt from providing quantitative and qualitative disclosures about market risk - MTBC is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[357](index=357&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=55&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the company's consolidated financial statements and supplementary data, which are included starting on page F-1 of the Annual Report on F

November 2020 Investor Presentation A leading healthcare technology company with a complete suite of proprietary, cloudbased solutions for healthcare providers NASDAQ Global Market: MTBC, MTBCP Safe Harbor Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology ...

Financial Data and Key Metrics Changes - The company reported record revenue of $31.6 million for Q3 2020, an increase of 88% compared to Q3 2019 [9] - Adjusted EBITDA reached a record $4.2 million, up 68% year-over-year [10] - Adjusted net income for Q3 was $3.5 million, a 58% increase from the previous year [10] - Year-to-date revenue for the first nine months of 2020 was $73.1 million, compared to $48.7 million in the same period of 2019, marking a 50% increase [40] Business Line Data and Key Metrics Changes - The company has significantly increased its sales and marketing investment, growing from 2.2% of revenue in the first nine months of 2019 to 6.5% in the same period of 2020, contributing to revenue growth [40] - The company has closed more than twice as much new organic business compared to all of 2019 [19] Market Data and Key Metrics Changes - The company serves approximately 40,000 providers across the country, with around 12,000 to 13,000 utilizing end-to-end revenue cycle management (RCM) [63] - Patient volumes are currently about 5% below pre-COVID levels, with many providers operating at near pre-COVID capacity [81] Company Strategy and Development Direction - The company is focused on empowering healthcare providers with tech-enabled solutions and has a robust acquisition strategy, having acquired CareCloud and Meridian Medical Management [15][36] - The company aims to achieve annualized revenues of over $130 million and adjusted EBITDA of more than $24 million by the end of 2020 [23][54] - The company is expanding its product offerings, including Precision BI and robotic process automation (RPA), to enhance its competitive position [25][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue growth of over 60% year-over-year and adjusted EBITDA growth of nearly 50% or more [23] - The company believes it is well-positioned to support healthcare providers during the ongoing COVID-19 pandemic [14] - Management anticipates continued organic growth and is optimistic about the potential for future acquisitions [68] Other Important Information - The company has approximately $22.8 million in cash and has paid 60 consecutive monthly dividends on its preferred stock [52] - The company expects to end 2020 with a historic annualized revenue run rate of $130 million or greater [53] Q&A Session Summary Question: Guidance and Top-Line Growth - Management clarified that the 60% year-over-year growth refers to 2020 compared to 2019, with guidance for 2021 to be provided in Q1 of next year [58] Question: Depreciation and Amortization - The $3.2 million in depreciation and amortization for Q3 includes both CareCloud and Meridian, and is considered a good baseline going forward [60] Question: Priorities for Business Optimization - Management emphasized the importance of both optimizing current business and pursuing new acquisitions, with expectations of 25% to 30% adjusted EBITDA margins in 2021 [61][62] Question: Changes in Customer Base Post-Acquisitions - The company has seen increased involvement with larger hospital clients and multi-specialty groups, enhancing cross-selling opportunities [64] Question: Organic Growth Strategy - Management indicated that a significant portion of organic growth will come from cross-selling and upselling to existing customers, with 20% to 25% of bookings currently from these efforts [87]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2020 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 001-36529 MTBC, Inc. (Exact name of registrant as specified in its charter) Delaware 22-3832302 (State or other jurisdiction ...

Financial Performance & Growth - MTBC achieved accelerating revenue growth with a targeted strategy, resulting in a 49% Compound Annual Growth Rate (CAGR)[6, 15] - Q3 2020 revenue reached $31.6 million, an 88% year-over-year increase, setting a new record[6] - Q3 2020 Adjusted EBITDA was $4.2 million, a 62% year-over-year increase, also setting a new record[6] - The company reaffirmed its full-year revenue outlook of $105-$107 million and adjusted EBITDA of $12-$13 million[23] - The company's revenue run rate for 2020 is projected to be $130-$135 million[6] Acquisitions & Integration - Strategic acquisitions, including Meridian Medical Management and CareCloud Corporation, are key to MTBC's growth strategy[3, 6] - CareCloud's operating expenses were reduced by 46% by Q3 post-acquisition, and Meridian's operating expenses were reduced by 16% by Q3 post-acquisition[18] Capitalization - As of November 6, 2020, MTBC's equity value was $116 million for common stock and $138 million for Series A Preferred Stock[21]

l © 8 $ GII R TUES 19 talkEHR™ $ R ·CD NASDAQ Global Market: MTBC, MTBCP August 2020 Safe Harbor Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such as "anticipate", "believe", "continue", "could", "estimate", "expect", "goals", "intend", "likely", "may ...

Part I. Financial Information [Condensed Consolidated Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The company's financial position significantly changed in the first half of 2020, driven by acquisitions that doubled total assets to **$125.9 million**, increased liabilities to **$46.5 million**, and despite **30%** revenue growth to **$41.4 million**, resulted in a **$7.3 million** net loss and negative **$2.9 million** operating cash flow [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, total assets increased to **$125.9 million** from **$56.4 million** at year-end 2019, primarily due to acquisitions significantly boosting goodwill and intangible assets, while total liabilities rose to **$46.5 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2020 (Unaudited) | Dec 31, 2019 | | :--- | :--- | :--- | | **Total Current Assets** | $31,000 | $31,002 | | **Goodwill** | $49,708 | $12,634 | | **Intangible Assets, net** | $31,793 | $5,977 | | **Total Assets** | **$125,915** | **$56,403** | | **Total Current Liabilities** | $28,289 | $11,178 | | **Borrowings under line of credit** | $9,750 | $0 | | **Total Liabilities** | **$46,548** | **$13,565** | | **Total Shareholders' Equity** | **$79,367** | **$42,838** | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the six months ended June 30, 2020, revenue grew **30%** to **$41.4 million** driven by acquisitions, but operating expenses increased faster, resulting in a **$7.3 million** net loss, significantly wider than the prior year Financial Performance (Unaudited, in thousands, except per share data) | Metric | Q2 2020 | Q2 2019 | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | :--- | :--- | | **Net Revenue** | $19,579 | $16,749 | $41,446 | $31,830 | | **Operating Loss** | ($4,610) | ($1,228) | ($7,447) | ($1,466) | | **Net Loss** | ($4,793) | ($771) | ($7,294) | ($1,067) | | **Net Loss Per Share** | ($0.65) | ($0.19) | ($1.07) | ($0.34) | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2020, net cash used in operating activities was **$2.9 million**, a significant shift from the prior year, while investing activities used **$27.2 million** primarily for acquisitions, offset by **$23.1 million** from financing activities Cash Flow Summary (Unaudited, in thousands) | Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($2,929) | $3,313 | | Net cash used in investing activities | ($27,155) | ($2,504) | | Net cash provided by (used in) financing activities | $23,059 | ($4,258) | | **Net Decrease in Cash** | **($7,462)** | **($3,889)** | - The company paid **$23.7 million** in cash for acquisitions during the first six months of 2020[28](index=28&type=chunk) - Financing activities were primarily driven by **$19.0 million** in net proceeds from issuing preferred stock and drawing **$19.5 million** from a line of credit, offset by a **$9.75 million** repayment of the same line[28](index=28&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the significant impact of the 2020 CareCloud and Meridian acquisitions, which involved **$23.7 million** cash and substantial stock, adding **$37.1 million** to goodwill, driving SaaS revenue growth, and shaping the company's two operating segments - The company is a healthcare IT firm offering a suite of cloud-based EHR and practice management solutions, primarily growing through acquisitions[29](index=29&type=chunk)[30](index=30&type=chunk) 2020 Acquisitions Summary | Acquisition | Date | Cash Paid (net) | Stock/Warrants Issued | | :--- | :--- | :--- | :--- | | **CareCloud** | Jan 2020 | ~$11.9M | 760,000 Preferred Shares, 2M Warrants | | **Meridian** | June 2020 | ~$11.9M | 200,000 Preferred Shares, 2.25M Warrants | - Goodwill increased by **$37.1 million** in the first six months of 2020, with **$22.9 million** from the CareCloud acquisition and **$14.2 million** from the Meridian acquisition[44](index=44&type=chunk)[56](index=56&type=chunk)[65](index=65&type=chunk) Revenue Disaggregation (Q2 2020 vs Q2 2019, in thousands) | Revenue Source | Q2 2020 | Q2 2019 | Change | | :--- | :--- | :--- | :--- | | Revenue cycle management | $11,365 | $11,367 | ~0% | | **SaaS solutions** | **$3,757** | **$66** | **+5592%** | | Practice management | $2,453 | $3,289 | -25% | | **Total** | **$19,579** | **$16,749** | **+17%** | - The company operates in two segments: Healthcare IT and Practice Management; for the six months ended June 30, 2020, Healthcare IT generated **$36.0 million** in revenue with a **($4.5 million)** operating loss, while Practice Management generated **$5.5 million** in revenue with **$81 thousand** operating income[145](index=145&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **30%** revenue growth to acquisitions, which also significantly increased operating expenses, while acknowledging potential COVID-19 impacts on client patient volumes and managing liquidity challenges from negative operating cash flow through a preferred stock offering - The COVID-19 pandemic did not materially adversely affect financial results for the first two quarters of 2020, but future patient visit volumes for clients remain uncertain[155](index=155&type=chunk)[157](index=157&type=chunk) - The company's competitive advantage stems from leveraging its offshore workforce in Pakistan and Sri Lanka, where labor costs are approximately **one-tenth** of comparable U.S. costs[162](index=162&type=chunk)[170](index=170&type=chunk) Adjusted EBITDA Reconciliation (in thousands) | Metric | Six Months 2020 | Six Months 2019 | | :--- | :--- | :--- | | **GAAP Net Loss** | **($7,294)** | **($1,067)** | | Stock-based compensation | $3,188 | $1,550 | | Depreciation & amortization | $3,738 | $1,593 | | Transaction & integration costs | $1,100 | $939 | | Other adjustments | $226 | ($195) | | **Adjusted EBITDA** | **$958** | **$2,720** | - Revenue for the first six months of 2020 increased by **$9.6 million** (**30%**), with acquired customers contributing approximately **$18.6 million** of the total **$41.4 million** revenue[207](index=207&type=chunk)[208](index=208&type=chunk) - Operating expenses for the first six months of 2020 increased significantly due to acquisitions, with Selling & Marketing up **331%** and Research & Development up **847%** compared to the prior year period[209](index=209&type=chunk)[210](index=210&type=chunk)[212](index=212&type=chunk) - Negative operating cash flow of **$2.9 million** was primarily due to paying down approximately **$9.9 million** in net payables assumed as part of the CareCloud and Meridian acquisitions[224](index=224&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the company is not required to provide disclosures regarding market risk - The company is a smaller reporting company and is not required to provide disclosures about market risk[234](index=234&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2020[237](index=237&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[238](index=238&type=chunk) Part II. Other Information [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in an arbitration proceeding with Randolph Pain Relief and Wellness Center (RPRWC) seeking approximately **$11 million** in damages from its subsidiary, MAC, which the company intends to vigorously defend - The primary legal proceeding involves an arbitration demand from Randolph Pain Relief and Wellness Center (RPRWC) against the company's subsidiary, MAC[82](index=82&type=chunk) - RPRWC's claimed damages have varied, with the latest estimate being approximately **$11 million** plus costs; the company plans to defend vigorously against the claims[84](index=84&type=chunk) [Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) The primary risk factor is the ongoing COVID-19 pandemic, which could reduce client patient volumes, impacting **65%** of revenue, challenge acquisition integration, and negatively affect liquidity and access to capital - The COVID-19 pandemic poses a significant risk, as approximately **65%** of the company's revenue is directly tied to cash collected by its healthcare provider customers, which could decline due to fewer patient visits[244](index=244&type=chunk) - The pandemic creates challenges for the integration of the CareCloud and Meridian acquisitions, potentially delaying the realization of expected benefits[248](index=248&type=chunk) - The ultimate impact of the COVID-19 pandemic is highly uncertain and will depend on the spread of the virus, its severity, duration, and governmental responses[249](index=249&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On June 16, 2020, the company issued **200,000** shares of Series A Preferred Stock and warrants for **2,250,000** common shares at **$7.50** per share as partial consideration for the Meridian acquisition, exempt from registration under Section 4(a)(2) of the Securities Act - On June 16, 2020, the company issued **200,000** shares of Series A Preferred Stock and warrants to purchase **2,250,000** shares of common stock as partial consideration for the Meridian acquisition[251](index=251&type=chunk) - The issuance was an unregistered sale, exempt from registration under Section 4(a)(2) of the Securities Act as a transaction not involving a public offering[251](index=251&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Q1 2020 report a net loss on increased revenues, primarily driven by acquisitions, with total assets significantly rising due to the CareCloud acquisition and detailed notes on key events and segment performance [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $8,395,321 | $19,994,134 | | Total current assets | $23,405,685 | $31,002,135 | | Goodwill | $38,351,775 | $12,633,696 | | Intangible assets - net | $17,337,093 | $5,977,225 | | **Total Assets** | **$89,832,645** | **$56,403,465** | | **Liabilities & Equity** | | | | Total current liabilities | $18,177,371 | $11,177,836 | | Borrowings under line of credit | $9,750,000 | $0 | | **Total Liabilities** | **$32,635,686** | **$13,565,140** | | **Total Shareholders' Equity** | **$57,196,959** | **$42,838,325** | - The significant increase in Goodwill and Intangible Assets is primarily due to the acquisition of CareCloud in January 2020[17](index=17&type=chunk)[44](index=44&type=chunk) [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Statement of Operations Summary (Unaudited, for the three months ended March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | **Net Revenue** | **$21,867,169** | **$15,080,211** | | Total operating expenses | $24,704,371 | $15,318,208 | | Operating Loss | ($2,837,202) | ($237,997) | | **Net Loss** | **($2,501,770)** | **($295,691)** | | Net loss attributable to common shareholders | ($5,144,686) | ($1,788,391) | | Net loss per common share (basic and diluted) | ($0.42) | ($0.15) | - Revenue grew **45%** year-over-year, primarily driven by acquisitions, however, operating expenses also increased significantly, leading to a larger operating and net loss compared to the prior year[19](index=19&type=chunk)[187](index=187&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (Unaudited, for the three months ended March 31) | Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($3,883,414) | $937,509 | | Net cash used in investing activities | ($14,033,196) | ($510,938) | | Net cash provided by (used in) financing activities | $6,809,586 | ($2,586,271) | | **Net Decrease in Cash** | **($11,598,813)** | **($1,945,836)** | | **Cash - end of the period** | **$8,395,321** | **$12,526,647** | - Cash used in investing activities surged due to **$11.9 million** paid for the CareCloud acquisition, while cash from financing activities was positive due to drawing **$9.75 million** from the line of credit[28](index=28&type=chunk)[205](index=205&type=chunk) - Operating cash flow was negative **$3.9 million**, primarily because the company assumed and paid approximately **$5.1 million** of net payables from the CareCloud acquisition[203](index=203&type=chunk)[207](index=207&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - On January 8, 2020, the Company acquired CareCloud Corporation for a total consideration including approximately **$11.9 million** in cash, assumption of approximately **$5.1 million** in working capital deficiency, **760,000 shares** of Preferred Stock, and warrants, which added **$7.6 million** in revenue for the quarter[38](index=38&type=chunk)[39](index=39&type=chunk)[46](index=46&type=chunk) Disaggregation of Revenue (for the three months ended March 31) | Revenue Source | 2020 | 2019 | | :--- | :--- | :--- | | Revenue cycle management services | $13,189,963 | $10,516,840 | | SaaS solutions | $3,613,514 | $40,602 | | Practice management services | $3,026,304 | $2,960,467 | | Other Services | $1,938,388 | $1,262,302 | | **Total** | **$21,867,169** | **$15,080,211** | - The company reports in two segments: Healthcare IT and Practice Management, with Healthcare IT generating **$18.8 million** in revenue and an operating loss of **($1.7 million)**, and Practice Management generating **$3.0 million** in revenue with an operating loss of **($19 thousand)** for Q1 2020[133](index=133&type=chunk) - Subsequent to the quarter end, in April 2020, the Company sold **828,000 shares** of its Series A Preferred Stock, receiving net proceeds of approximately **$19.1 million**[134](index=134&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=28&type=page&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the **45% year-over-year revenue growth** to **$21.9 million** for Q1 2020, primarily due to acquisitions, alongside significant increases in operating expenses, a decline in Adjusted EBITDA, and the potential impacts of the COVID-19 pandemic on future results and liquidity Q1 2020 vs Q1 2019 Results of Operations ($M) | Metric | Q1 2020 | Q1 2019 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenue | $21.9 | $15.1 | +45% | | Direct Operating Costs | $13.6 | $9.8 | +38% | | Selling and Marketing | $1.6 | $0.4 | +338% | | Research and Development | $2.3 | $0.3 | +816% | | General and Administrative | $5.6 | $4.2 | +34% | | **Operating Loss** | **($2.8)** | **($0.2)** | N/A | - The COVID-19 pandemic did not materially adversely affect Q1 2020 results, but management expects it to impact the second quarter and beyond, particularly as a majority of revenue is tied to client collections which may decline due to fewer patient visits[139](index=139&type=chunk)[140](index=140&type=chunk)[225](index=225&type=chunk) Non-GAAP Financial Measures (in thousands) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | GAAP net loss | ($2,502) | ($296) | | **Adjusted EBITDA** | **$767** | **$1,580** | | GAAP operating loss | ($2,837) | ($238) | | **Non-GAAP adjusted operating income** | **$428** | **$1,147** | | **Non-GAAP adjusted net income** | **$354** | **$1,277** | - Liquidity was managed by drawing the full **$9.75 million** available on its SVB line of credit in Q1 2020, and in April 2020, the company raised an additional **$19.1 million** in net proceeds from a preferred stock sale, a portion of which was used to repay the credit line[204](index=204&type=chunk)[211](index=211&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=38&type=page&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, MTBC, Inc. is not required to provide the information requested under this item - The company is a smaller reporting company as defined by 17 C.F.R. 229.10(f)(1) and is not required to provide information under this item[214](index=214&type=chunk) [Controls and Procedures](index=38&type=page&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of March 31, 2020, the company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the disclosure controls and procedures were effective at a reasonable assurance level, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2020, the company's disclosure controls and procedures were effective at the reasonable assurance level[218](index=218&type=chunk) - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[219](index=219&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=40&type=page&id=Item%201.%20Legal%20Proceedings) The company refers to Note 8 of the financial statements regarding an arbitration demand filed by Randolph Pain Relief and Wellness Center (RPRWC) against its subsidiary, MTBC Acquisition Corp. (MAC), seeking **$6.6 million** in damages, though MTBC, Inc. itself is not compelled to participate - The company is involved in an arbitration proceeding where a claimant, RPRWC, seeks **$6.6 million** in damages from its subsidiary, MAC, for an alleged breach of a billing services agreement[73](index=73&type=chunk)[75](index=75&type=chunk) - On February 6, 2020, a court granted summary judgment in favor of MTBC, Inc., holding that it cannot be compelled to participate in the arbitration, which will proceed only against the subsidiary, MAC[74](index=74&type=chunk) [Risk Factors](index=40&type=page&id=Item%201A.%20Risk%20Factors) This section primarily focuses on the risks associated with the COVID-19 pandemic, including its negative impact on healthcare provider customers and the company's revenue, challenges to global operations, and volatility in financial markets - The business is subject to significant risks from the COVID-19 pandemic, which could harm operations, financial condition, and growth[224](index=224&type=chunk) - A key risk is the financial health of healthcare provider customers, as suspended elective procedures and fewer patient visits will likely harm their financial condition, adversely affecting MTBC's revenue, since approximately **60%** of it is tied to customer cash collections[225](index=225&type=chunk) - The pandemic has caused significant volatility in financial markets, which could reduce the company's ability to access capital and negatively affect liquidity and the value of its stock[227](index=227&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=41&type=page&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) On January 8, 2020, in connection with the CareCloud acquisition, the company issued **760,000 shares** of its Series A Preferred Stock to the seller, exempt from registration under Section 4(a)(2) of the Securities Act as a private offering - As partial consideration for the CareCloud acquisition, the company issued **760,000 shares** of Series A Preferred Stock on January 8, 2020[229](index=229&type=chunk) - The transaction was exempt from registration under Section 4(a)(2) of the Securities Act as a private offering not involving public distribution[229](index=229&type=chunk) [Defaults Upon Senior Securities](index=41&type=page&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable [Mine Safety Disclosures](index=41&type=page&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=41&type=page&id=Item%205.%20Other%20Information) Not applicable [Exhibits](index=42&type=page&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and XBRL (eXtensible Business Reporting Language) data files - The report includes required certifications from the CEO and CFO under Exchange Act Rules 13a-14(a)/15d-14(a) and Section 1350 of the Sarbanes-Oxley Act[234](index=234&type=chunk) - Interactive Data Files (XBRL) are included as exhibits, covering the instance document, schema, and various linkbases (calculation, label, presentation, definition)[234](index=234&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark one) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-36529 MTBC, Inc. (Exact name of registrant as specified in its charter) Delaware 22-3832302 (State or other jurisdiction of inco ...