☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At ~~October 28, 2022,~~April 27, 2023, the registrant had ~~15,220,208~~15,592,608 shares of common stock, par value $0.001 per share, outstanding.

Certain statements that we make from time to time, including statements contained in this Quarterly Report on Form 10-Q, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. 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 “may,” “might,” “will,” “shall,” “should,” “could,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “seeks,” “estimates,” “forecasts,” “predicts,” “possible,” “potential,” “target,” or “continue” or the negative of these terms or other comparable terminology. Our operations involve risks and uncertainties, many of which are outside of our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements reflecting management’s expectations for future financial performance and operating expenditures (including our ability to continue as a going concern, to raise additional capital and to succeed in our future operations), expected growth, profitability and business outlook, increased sales and marketing expenses, and the expected results from the integration of our acquisitions.

Forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties, and other factors ~~which~~that may cause our (or our industry’s) actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or implied by these forward-looking statements. These factors include, among other things, the unknown risks and uncertainties that we believe could cause actual results to differ from these forward-looking statements as set forth under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March ~~14, 2022.~~2, 2023. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements, including without limitation, risks and uncertainties relating to:

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on our current expectations, beliefs and views as of the date of this Quarterly Report on Form 10-Q concerning future developments and their potential effects on our business. Although we believe that the expectations reflected in the forward-looking statements contained in this Quarterly Report on Form 10-Q are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We anticipate that subsequent events and developments may cause our assessments to change.Except as required by law, we are under no duty to update or revise any of such forward-looking statements, whether as a result of new information, future events, or otherwise, after the date of this Quarterly Report on Form 10-Q.

You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we currently expect. The forward-looking statements contained herein should not be relied upon as representing our assessments as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

	September 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
	(Unaudited)						(Unaudited)
ASSETS
Current assets:
Cash	$	3,867		$	9,340		$	8,161		$	12,299
Restricted cash		1,000			1,000
Accounts receivable - net of allowance for doubtful accounts of $660 and $537 at September 30, 2022 and December 31, 2021, respectively		16,281			17,006
Accounts receivable - net								14,646			14,773
Contract asset		4,407			4,725			5,018			4,399
Inventory		418			503			265			381
Current assets - related party		16			13			16			16
Prepaid expenses and other current assets		3,694			2,972			3,371			2,785
Total current assets		29,683			35,559			31,477			34,653
Property and equipment - net		5,102			5,404			4,520			5,056
Operating lease right-of-use assets		4,679			6,940			4,465			4,921
Intangible assets - net		29,759			30,778			28,535			29,520
Goodwill		61,186			61,186			61,186			61,186
Other assets		787			981			838			838
TOTAL ASSETS	$	131,196		$	140,848		$	131,021		$	136,174
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,568		$	5,948		$	5,191		$	5,681
Accrued compensation		3,963			4,251			2,597			4,248
Accrued expenses		5,322			5,091			3,728			4,432
Operating lease liability (current portion)		2,554			3,963			2,095			2,273
Deferred revenue (current portion)		1,417			1,085			1,394			1,386
Deferred payroll taxes		934			934
Notes payable (current portion)		552			344			84			319
Contingent consideration (current portion)		200			3,090
Dividend payable		4,040			3,856			4,115			4,059
Consideration payable		1,000			1,000
Total current liabilities		24,550			29,562			19,204			22,398
Notes payable		14			20			12			13
Borrowings under line of credit		-			8,000			10,000			8,000
Operating lease liability		2,907			4,545			2,822			3,207
Deferred revenue		390			341			350			342
Deferred tax liability		511			449			551			525
Total liabilities		28,372			42,917			32,939			34,485
COMMITMENTS AND CONTINGENCIES (NOTE 8)		-			-
COMMITMENTS AND CONTINGENCIES (NOTE 7)								-			-
SHAREHOLDERS’ EQUITY:
Preferred stock, $0.001 par value - authorized 7,000,000 shares. Series A, issued and outstanding 4,526,231 and 5,299,227 shares at September 30, 2022 and December 31, 2021, respectively. Series B, issued and outstanding 1,309,216 shares at September 30, 2022		6			5
Common stock, $0.001 par value - authorized 35,000,000 shares. Issued 15,951,935 and 15,657,641 shares at September 30, 2022 and December 31, 2021, respectively. Outstanding 15,211,136 and 14,916,842 shares at September 30, 2022 and December 31, 2021, respectively		16			16
Preferred stock, $0.001 par value - authorized 7,000,000 shares. Series A, issued and outstanding 4,526,231 shares at March 31, 2023 and December 31, 2022. Series B, issued and outstanding 1,445,392 and 1,344,128 shares at March 31, 2023 and December 31, 2022, respectively								6			6
Common stock, $0.001 par value - authorized 35,000,000 shares. Issued 16,333,407 and 15,970,204 shares at March 31, 2023 and December 31, 2022, respectively. Outstanding 15,592,608 and 15,229,405 shares at March 31, 2023 and December 31, 2022, respectively								16			16
Additional paid-in capital		133,120			131,379			129,678			130,987
Accumulated deficit		(26,120	)		(31,053	)		(26,208	)		(25,621	)
Accumulated other comprehensive loss		(3,536	)		(1,754	)		(4,748	)		(3,037	)
Less: 740,799 common shares held in treasury, at cost at September 30, 2022 and December 31, 2021		(662	)		(662	)
Less: 740,799 common shares held in treasury, at cost at March 31, 2023 and December 31, 2022								(662	)		(662	)
Total shareholders’ equity		102,824			97,931			98,082			101,689
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	131,196		$	140,848		$	131,021		$	136,174

	2022			2021			2022			2021
	Three Months Ended						Nine Months Ended						2023			2022
	September 30,						September 30,						March 31,
	2022			2021			2022			2021			2023			2022
NET REVENUE	$	33,723		$	38,304		$	106,292		$	102,137		$	30,001		$	35,341
OPERATING EXPENSES:
Direct operating costs		20,406			24,124			64,866			62,719			18,107			22,673
Selling and marketing		2,504			2,375			7,314			6,469			2,612			2,384
General and administrative		6,500			5,921			18,479			17,814			5,120			5,585
Research and development		1,168			488			3,251			4,328			1,078			985
Change in contingent consideration		(1,660	)		-			(2,890	)		-			-			(600	)
Depreciation and amortization		2,810			3,547			8,686			9,505			3,038			2,940
Net loss on lease termination, impairment and unoccupied lease charges		307			424			928			1,664
Net loss on lease termination and unoccupied lease charges														269			158
Total operating expenses		32,035			36,879			100,634			102,499			30,224			34,125
OPERATING INCOME (LOSS)		1,688			1,425			5,658			(362	)
OPERATING (LOSS) INCOME														(223	)		1,216
OTHER:
Interest income		14			4			22			10			20			5
Interest expense		(96	)		(91	)		(303	)		(274	)		(150	)		(100	)
Other expense - net		(495	)		(65	)		(300	)		(80	)
INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES		1,111			1,273			5,077			(706	)
Income tax provision (benefit)		55			(232	)		144			(20	)
NET INCOME (LOSS)	$	1,056		$	1,505		$	4,933		$	(686	)
Other income - net														17			83
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES														(336	)		1,204
Income tax provision														65			64
NET (LOSS) INCOME													$	(401	)	$	1,140

Preferred stock dividend		3,849			3,642			11,662			10,408			3,931			4,037
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	(2,793	)	$	(2,137	)	$	(6,729	)	$	(11,094	)	$	(4,332	)	$	(2,897	)

Net loss per common share: basic and diluted	$	(0.18	)	$	(0.15	)	$	(0.45	)	$	(0.77	)	$	(0.28	)	$	(0.19	)
Weighted-average common shares used to compute basic and diluted loss per share		15,148,721			14,737,103			15,070,913			14,419,968			15,421,096			14,992,147

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~ (UNAUDITED)

		2022			2021			2022			2021				2023			2022
		Three Months Ended						Nine Months Ended							March 31,
		September 30,						September 30,							2023			2022
		2022			2021			2022			2021
NET INCOME (LOSS)		$	1,056		$	1,505		$	4,933		$	(686	)
NET (LOSS) INCOME															$	(401	)	$	1,140
OTHER COMPREHENSIVE LOSS, NET OF TAX
Foreign currency translation adjustment (a)	(a)		(537	)		(475	)		(1,782	)		(535	)	(a)		(1,711	)		(255	)
COMPREHENSIVE INCOME (LOSS)		$	519		$	1,030		$	3,151		$	(1,221	)
COMPREHENSIVE (LOSS) INCOME															$	(2,112	)	$	885

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2023 AND MARCH 31, 2022 ~~AND SEPTEMBER 30, 2021~~

For all periods presented, the preferred stock dividends were paid monthly at the rate of $2.75 and $2.19 for Series A and Series B, respectively, per share per annum.

FOR THE ~~NINE~~THREE MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2023 AND 2022 ~~AND 2021~~

	2022			2021			2023			2022
OPERATING ACTIVITIES:
Net income (loss)	$	4,933		$	(686	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Net (loss) income							$	(401	)	$	1,140
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		9,120			9,853			3,205			3,080
Lease amortization		2,474			2,191			683			832
Deferred revenue		381			(193	)		16			104
Provision for doubtful accounts		715			465			97			131
Provision for deferred income taxes		62			140			26			36
Foreign exchange loss (gain)		238			(87	)
Foreign exchange gain								(11	)		(52	)
Interest accretion		460			599			166			168
Gain on sale of assets								-			(6	)
Stock-based compensation expense		3,399			4,006			1,072			887
Change in contingent consideration		(2,890	)		-			-			(600	)
Adjustment of goodwill		-			36
Changes in operating assets and liabilities, net of businesses acquired:
Changes in operating assets and liabilities:
Accounts receivable		10			(1,363	)		(156	)		(1,618	)
Contract asset		318			(556	)		(619	)		80
Inventory		85			(101	)		116			86
Other assets		62			(135	)		(615	)		(97	)
Accounts payable and other liabilities		(4,264	)		(6,959	)		(2,556	)		(1,084	)
Net cash provided by operating activities		15,103			7,210			1,023			3,087
INVESTING ACTIVITIES:
Purchase of property and equipment		(2,156	)		(1,992	)
Purchases of property and equipment								(835	)		(544	)
Capitalized software		(6,967	)		(5,277	)		(2,204	)		(2,253	)
Cash paid for acquisitions (net)		-			(12,582	)
Net cash used in investing activities		(9,123	)		(19,851	)		(3,039	)		(2,797	)
FINANCING ACTIVITIES:
Preferred stock dividends paid		(11,478	)		(10,806	)		(3,875	)		(3,943	)
Settlement of tax withholding obligations on stock issued to employees		(1,140	)		(2,096	)		(1,113	)		(775	)
Repayments of notes payable, net		(769	)		(745	)
Repayments of notes payable								(236	)		(251	)
Stock issuance costs		(32	)		(43	)		-			(11	)
Proceeds from exercise of warrants		-			6,434
Proceeds from issuance of Series B Preferred Stock, net of expenses		30,280			-			1,437			26,638
Proceeds from issuance of common stock, net of expenses		-			2,528
Redemption of Series A Preferred Stock		(20,005	)		-			-			(20,000	)
Proceeds from line of credit		17,500			11,000			12,700			8,500
Repayment of line of credit		(25,500	)		(5,000	)		(10,700	)		(10,500	)
Net cash (used in) provided by financing activities		(11,144	)		1,272
Net cash used in financing activities								(1,787	)		(342	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(309	)		(243	)		(335	)		(152	)
NET DECREASE IN CASH AND RESTRICTED CASH		(5,473	)		(11,612	)		(4,138	)		(204	)
CASH AND RESTRICTED CASH - Beginning of the period		10,340			20,925			12,299			10,340
CASH AND RESTRICTED CASH - End of the period	$	4,867		$	9,313		$	8,161		$	10,136
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
Preferred stock cancelled in connection with an acquisition	$	-		$	(4,000	)
Contingent consideration	$	-		$	6,500
Dividends declared, not paid	$	4,040		$	3,843		$	4,115		$	3,950
Purchase of prepaid insurance with assumption of note	$	695		$	967
SUPPLEMENTAL INFORMATION - Cash paid during the period for:
Income taxes	$	128		$	237		$	2		$	-
Interest	$	125		$	55		$	75		$	40

AS OF AND FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30, 2022~~MARCH 31, 2023

CareCloud, Inc. ~~(“CareCloud”~~, ~~and together~~(together with its consolidated subsidiaries, “CareCloud,” the “Company,” “we,” “us” and/or “our”) is a leading provider of technology-enabled services and solutions that redefine the healthcare ~~information technology company that provides~~revenue cycle. We provide technology-enabled revenue cycle management and a full suite of proprietary cloud-based solutions ~~together with related business services,~~ to healthcare providers, from small practices to enterprise medical groups, hospitals, and ~~hospitals~~health systems throughout the United States. ~~The Company’s integrated services are designed to help customers~~Healthcare organizations today operate in highly complex and regulated environments. Our suite of technology-enabled solutions helps our clients increase ~~revenues,~~financial and operational performance, streamline clinical workflows, and ~~make better~~improve the patient experience.

Our portfolio of proprietary software and business ~~and clinical decisions, while reducing administrative burdens and operating costs. Our Software-as-a-Service (“SaaS”) platform includes~~services includes: technology-enabled business solutions that maximize revenue cycle management ~~(“RCM”),~~and create efficiencies through platform agnostic AI-driven applications; cloud-based software that helps providers manage their practice and patient engagement while leveraging analytics to improve provider performance; digital health services to address value-based care and enable the delivery of remote patient care; healthcare IT professional services & staffing to address physician burnout, staffing shortages and leverage consulting expertise to transition into the next generation of healthcare; and, medical practice management ~~(“PM”), electronic health record (“EHR”),~~services to assist medical providers with operating models and the tools needed to run their practice.

Our high-value business ~~intelligence, telehealth, patient experience~~services, such as revenue cycle management, ~~(“PXM”) solutions~~are often paired with our cloud-based software, premiere healthcare consulting and ~~complementary software tools~~implementation services, and ~~business services~~on-demand workforce staffing capabilities for high-performance medical groups and health ~~systems.~~ systems nationwide.

CareCloud has its corporate offices in Somerset, New Jersey and maintains client support teams throughout the U.S., and offshore offices in Pakistan and Azad Jammu and Kashmir, a region administered by Pakistan (the “Pakistan Offices”), and in Sri Lanka.

CareCloud was founded in 1999 under the name Medical Transcription Billing, Corp. and incorporated under the laws of the State of Delaware in 2001. In 2004, the Company formed MTBC Private Limited ~~(or “MTBC~~(“MTBC Pvt. Ltd.”), a ~~99.9%~~99.9% majority-owned subsidiary of CareCloud based in Pakistan. The remaining ~~0.1%~~0.1% of the shares of MTBC Pvt. Ltd. is equally owned by the founder and Executive Chairman of CareCloud and a local employee who is also a director of this entity. ~~Effective April 1, 2022, the Company formed MTBC Bagh Private Limited (or “MTBC Bagh Pvt. Ltd.”), a~~ ~~99.8%~~ ~~majority-owned subsidiary of CareCloud based in Azad Jammu and Kashmir, a region administered by Pakistan. The remaining~~ ~~0.2%~~ ~~of the shares of MTBC Bagh Pvt. Ltd. is equally owned by the founder and Executive Chairman of CareCloud and the same director/employee as above.~~ In 2016, the Company formed MTBC Acquisition Corp. (“MAC”), a Delaware corporation, in connection with its acquisition of substantially all of the assets of MediGain, LLC and its subsidiary, Millennium Practice Management Associates, LLC (together “MediGain”). MAC has a wholly owned subsidiary in Sri Lanka, RCM MediGain Colombo, Pvt. Ltd. In May 2018, the Company formed CareCloud Practice Management, Corp. (“CPM”), a Delaware corporation, to operate the medical practice management business acquired from Orion Healthcorp.

In January 2020, the Company purchased CareCloud Corporation, a company whose name we took. That company is now known as CareCloud Health, Inc. (“CCH”). In June 2020, the Company purchased Meridian Billing Management Co. and its affiliate Origin Holdings, Inc. (collectively “Meridian” and sometimes referred to as “Meridian Medical Management”). Both companies were subsequently merged and the surviving company was renamed Meridian Medical Management, Inc.

During March 2021, the Company formed a new wholly-owned subsidiary, CareCloud Acquisition, Corp. (“CAC”). In June 2021, CAC purchased certain assets and assumed certain liabilities of MedMatica Consulting Associates Inc., (“MedMatica”) and purchased the stock of Santa Rosa Staffing, Inc., (“SRS”). The assets and liabilities of MedMatica were merged into SRS and the company was renamed medSR, Inc. (“medSR”). ~~See Note 3.~~

Effective April 1, 2022, the Company formed MTBC Bagh Private Limited (“MTBC Bagh Pvt. Ltd.”), a 99.8% majority-owned subsidiary of CareCloud based in Azad Jammu and Kashmir, a region administered by Pakistan. The remaining 0.2% of the shares of MTBC Bagh Pvt. Ltd. is equally owned by the founder and Executive Chairman of CareCloud and the same director/employee as noted above.

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 8-03. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the Company’s financial position as of ~~September 30, 2022,~~March 31, 2023, the results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ and cash flows for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, ~~2021,~~2022, which are included in the Company’s Annual Report on Form 10-K, filed with the SEC on March ~~14, 2022.~~2, 2023.

Recent Accounting Pronouncements — From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) and are adopted by us as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently adopted and recently issued accounting pronouncements will not have a material impact on our consolidated financial position, results of operations and cash flows.

In June 2016, the FASB issued ASU 2016-13, ~~including subsequent codification improvements,~~ Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments. The guidance in Accounting Standards Update (“ASU”) 2016-13 replaces the incurred loss impairment methodology under current GAAP. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. It will apply to all entities. For trade receivables, loans and held-to-maturity debt securities, entities will be required to estimate lifetime expected credit losses. This may result in the earlier recognition of credit losses. In November 2019, the FASB issued ASU No. 2019-10, which delays this standard’s effective date for SEC smaller reporting companies to the fiscal years beginning on or after December 15, 2022. The Company adopted this guidance on January 1, 2023 using a modified retrospective adoption methodology, whereby the cumulative impact of all prior periods is recorded in accumulated deficit or other impacted balance sheet items upon adoption. The impact to the ~~process~~accumulated deficit as of ~~determining~~January 1, 2023 for the allowance related to accounts receivable was a charge of approximately $186,000 and a corresponding increase to the allowance for doubtful accounts.

In 2020, the FASB issued ASU 2020-04 to simplify the accounting for contract modifications made to replace LIBOR or other reference rates that are expected to be discontinued because of reference rate reform. The guidance provides optional expedients and exceptions for applying U.S. GAAP to these contract modifications if ~~this update will have a significant~~certain criteria are met. The optional expedients and exceptions can be applied to contract modifications made until December 31, 2022. There was no impact on the consolidated financial ~~statements.~~statements as a result of this standard.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). This ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The Company adopted this guidance effective January 1, 2022. There was no impact on the consolidated financial statements as a result of this standard.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in this update require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination. The amendments are effective for public business entities for fiscal years beginning after December 15, 2022. There was no impact on the consolidated financial statements as a result of this standard.

In March 2023, the FASB issued ASU 2023-01, Leases (Topic 842): Common Control Arrangements – Issue 2. The amendments in this update require that leasehold improvements associated with common control leases be: (1) amortized by the lessee over the useful life of the leasehold improvements to the common control group as long as the lessee controls the use of the underlying asset through a lease and (2) accounted for as a transfer between entities under common control through an adjustment to equity if, and when, the lessee no longer controls the use of the underlying asset. The amendments in this update are effective for fiscal years beginning after December 15, 2023. The Company ~~is in the process of determining if~~does not expect this update ~~will~~to have a ~~significant~~material impact on ~~its~~the consolidated financial statements.

On June 1, 2021, CAC entered into an Asset and Stock Purchase Agreement (“Purchase Agreement”) with MedMatica and its sole shareholder. Pursuant to the Purchase Agreement, CAC acquired (i) all of the issued and outstanding capital stock of SRS, a Delaware corporation, and (ii) all of the MedMatica assets that were used in MedMatica’s and SRS’ business. Certain MedMatica liabilities were also assumed under the Purchase Agreement. The total cash consideration was $10 ~~million plus a working capital adjustment of approximately $3.8~~ million. The Purchase Agreement also provides that if during the 18-month period commencing on June 1, 2021 (the “Earn-Out Period”), certain EBITDA and revenue targets with respect to the assets and capital stock purchased under the Purchase Agreement are achieved, then CAC shall pay MedMatica an earn-out up to a maximum of $8 million. Further, if during the Earn-Out Period, certain additional and increased EBITDA and revenue targets with respect to the assets and capital stock purchased under the Purchase Agreement are achieved, then CAC shall pay MedMatica an additional earn-out, up to a maximum of $5 ~~million.~~

MedMatica and SRS were in the business of providing a broad range of specialty consulting services to hospitals and large healthcare groups, including certain consulting services related to healthcare IT application services and implementations, medical practice management, and revenue cycle management. The acquisition has been accounted for as a business combination.

The Company engaged a third party valuation specialist to assist the Company in valuing the assets acquired and liabilities assumed from MedMatica. The following table summarizes the purchase price allocation.

The acquired accounts receivable is recorded at fair value, which represents amounts that have subsequently been paid or were expected to be paid by clients. The fair value of customer relationships was based on the estimated discounted cash flows generated by these intangibles. The goodwill represents the Company’s ability to have an expanded local presence in additional markets and operational synergies that we expect to achieve that would not be available to other market participants. The goodwill from this acquisition is deductible ratably for income tax purposes over fifteen years. The purchase agreement provides that if revenue and EBITDA over the next 18 months exceeds certain specified amounts, there will be an earn-out payment to the seller equal to such excess, up to $13 ~~million. It was estimated that the probable payment will be approximately $5.6~~ million and this amount was recorded as part of the purchase price allocation as contingent consideration. At September 30, 2022 and December 31, 2021, the Company determined that the fair value of the contingent consideration was approximately $~~200,000~~ ~~and $3.1~~ million, respectively, based in part on the actual operating results since the acquisition. The difference in the contingent consideration between December 31, 2021 and September 30, 2022 has been recorded as a change in contingent consideration in the consolidated statements of operations.

~~As part of the acquisition, $1.5~~ ~~million of the purchase price was held in escrow, which represented $500,000~~ ~~to be paid upon the achievement of agreed-upon revenue and backlog milestones, and the balance to be held for up to~~ ~~18 months~~ ~~to satisfy certain indemnification obligations. During the third quarter of 2021, the initial portion of the escrow was settled whereby $250,000~~ ~~was paid to the seller and $250,000~~ ~~was offset against the working capital adjustment. An additional $71,000~~ ~~that was held in escrow was also paid. The balance of the $~~1~~.0 million escrow is included in consideration payable and restricted cash in the consolidated balance sheets at December 31, 2021 and September 30, 2022. Approximately $12.3~~ ~~million in cash was paid at closing.~~

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

~~Revenue earned from the clients obtained from the medSR acquisition was approximately $6.4~~ ~~million and $22.2~~ ~~million for the three and nine months ended September 30, 2022, respectively.~~

The medSR acquisition added additional clients to the Company’s customer base and, similar to previous acquisitions, broadened the Company’s presence in the healthcare information technology industry through expansion of its customer base and by increasing available customer relationship resources and specialized trained staff.

The unaudited pro forma information below represents the consolidated results of operations as if the medSR acquisition occurred on January 1, 2021. The pro forma information has been included for comparative purposes and is not indicative of results of operations that the Company would have had if the acquisition occurred on the above date, nor is it necessarily indicative of future results. The unaudited pro forma information reflects material, non-recurring pro forma adjustments directly attributable to the business combination. The difference between the actual revenue and the pro forma revenue is approximately $~~17.8~~ ~~million of additional revenue recorded by medSR for the nine months ended September 30, 2021. Other differences arise from amortizing purchased intangibles using the double declining balance method.~~

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. The following is the summary of the changes to the carrying amount of goodwill for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and the year ended December 31, ~~2021:~~2022:

Intangible assets include customer contracts and relationships and covenants not-to-compete acquired in connection with acquisitions, as well as trademarks acquired and software costs. Intangible assets – net as of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021~~2022 consist of the following:

	September 30, 2022		December 31, 2021
	September 30, 2022		December 31, 2021		March 31, 2023		December 31, 2022
	($ in thousands)				($ in thousands)
Contracts and relationships acquired	$	47,597	$	47,597	$	47,597	$	47,597
Capitalized software		19,302		13,196		22,959		21,547
Non-compete agreements		1,236		1,236		1,236		1,236
Other intangible assets		8,399		8,396		8,415		8,415
Total intangible assets		76,534		70,425		80,207		78,795
Less: Accumulated amortization		46,775		39,647		51,672		49,275
Intangible assets - net	$	29,759	$	30,778	$	28,535	$	29,520

The amount for capitalized software represents payroll and development costs incurred for internally developed software. Other intangible assets primarily represent ~~acquired software and~~non-compete agreements, purchased intangibles. Amortization expense was approximately $~~7.3~~2.5 ~~million and $8.0~~ million for both the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively.~~2022. The weighted-average amortization period is three years.

As of ~~September 30, 2022,~~March 31, 2023, future amortization scheduled to be expensed is as follows:


Years ending December 31,	($ in thousands)		($ in thousands)
2022 (three months)	$	4,016
2023		12,275
2023 (nine months)			$	10,338
2024		8,122		9,498
2025		3,996		6,254
2026		300		1,395
2027				300
Thereafter		1,050		750
Total	$	29,759	$	28,535

The following table reconciles the weighted-average shares outstanding for basic and diluted net loss per share for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

At ~~September 30, 2022,~~March 31, 2023, the ~~480,526~~630,094 unvested equity restricted stock units (“RSUs”) as discussed in Note 1211 and ~~1,253,489~~128,489 unexercised warrants expiring between ~~October 2022~~July 2023 and September 2023 with exercise prices between $~~3.92~~5.00 to $~~10.00~~5.26 have been excluded from the above calculations as they were anti-dilutive. At ~~September 30, 2021,~~March 31, 2022, the ~~280,496~~465,926 unvested equity RSUs and ~~3,152,140~~2,152,140 unexercised warrants have been excluded from the above calculations as they were anti-dilutive. Vested RSUs, vested restricted shares and exercised warrants have been included in the above calculations.

~~SVB~~ Bank Debt~~— During~~ —During October 2017, the Company opened a revolving line of credit with Silicon Valley Bank (“SVB”) under a three-year agreement. The ~~SVB~~Company’s credit facility is a secured revolving line of credit where borrowings are based on a formula of ~~200%~~200% of repeatable revenue adjusted by an annualized attrition rate as defined in the credit agreement. During the third quarter of 2018, the credit line was increased from $5 million to $10 million and the term was extended for an additional year. During the third quarter of 2021, the credit line was further increased to $20 million and the term was extended for another year. During February 2023, the line of credit was increased to $25 million and the term was extended for two additional years. The financial covenants were also slightly modified for 2023 and subsequent years.

As of ~~September 30,~~March 31, 2023 and December 31, 2022, there was $no10 ~~borrowing~~million and $8 million, respectively, of borrowings under the credit facility. Interest on the ~~SVB~~ revolving line of credit is currently charged at the prime rate plus ~~1.50%~~1.50 ~~with a minimum rate of~~ ~~6.50%~~%. There is also a fee of one-half of 1% annually for the unused portion of the credit line. The debt is secured by all of the Company’s domestic assets and ~~65%~~65% of the shares in its offshore subsidiaries. Future acquisitions are subject to approval by SVB.

In connection with the original SVB debt agreement, the Company paid SVB approximately $50,000 of fees upfront and issued warrants for SVB to purchase 125,000 shares of its common ~~stock.~~stock, and committed to pay an annual anniversary fee of $50,000 a year. Based on the terms in the original SVB credit agreement, these warrants had a strike price equal to $3.92. They ~~also~~ had a five-year exercise window and net exercise rights, and were valued at $3.12 per warrant. These warrants were exercised during 2022. As a result of the revision in the ~~SVB~~ credit line, which increased the credit line from $5 million to $10 million and reduced the interest rate by 25 basis points, the Company paid approximately $50,000 of fees upfront and issued an additional 28,489 warrants, with a strike price equal to $5.26, a ~~five-year~~five-year exercise window and net exercise rights. The additional warrants were valued at $3.58 per warrant. The ~~SVB~~ credit agreement contains various covenants and conditions governing the revolving line of credit including a current annual fee of $100,000. These covenants include a minimum level of adjusted EBITDA and a minimum liquidity ratio. At ~~September 30,~~March 31, 2023 and December 31, 2022, ~~and 2021,~~ the Company was in compliance with all covenants.

During September 2021, the credit agreement was modified to include CAC and medSR as borrowers. During January 2022, the credit agreement ~~with SVB~~ was modified to allow the Company to issue Series B Preferred Stock and pay monthly dividends on this stock, to use a portion of the Series B offering proceeds to redeem a portion of the Series A Preferred Stock that is outstanding and to allow for the potential exchange of shares of Series A Preferred Stock for Series B Preferred Stock.

During March 2023, SVB became a division of First-Citizens Bank & Trust Company. The agreements that governed the former SVB relationship remain in place. There was no change to the terms of the credit agreement and the Company has had full access to its cash balances.

The Company maintains cash balances at SVB in excess of the FDIC insurance coverage limits. The Company performs periodic evaluations of the relative credit standing of this financial institution to ensure its credit worthiness. As of March 31, 2023 and December 31, 2022, the Company held cash of approximately $1.4 million and $1.8 million, respectively, in the name of its subsidiaries at banks in Pakistan and Sri Lanka. The banking systems in these countries do not provide deposit insurance coverage. The Company has not experienced any losses on its cash accounts.

Vehicle Financing Notes — The Company financed certain vehicle purchases ~~both~~ in the United ~~States and in Pakistan.~~States. The vehicle financing notes have ~~three to~~ six year terms and were issued at current market rates.

Insurance Financing — The Company finances certain insurance purchases over the term of the policy life. The interest rate charged is currently ~~4.55%~~4.55%.

We determine if an arrangement is a lease at inception. We have operating leases for office and temporary living space as well as for some office equipment. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liability and non-current operating lease liability in our consolidated balance sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The Company does not have any finance leases.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rates, which are derived from information available at the lease commencement date, in determining the present value of lease payments. We give consideration to our bank financing arrangements, geographical location and collateralization of assets when calculating our incremental borrowing rates.

Our lease terms include options to extend the lease when we believe that we may want the right to exercise that option. Leases with a term of less than 12 months are not recorded in the consolidated balance sheets. Our lease agreements do not contain any residual value guarantees. For real estate leases, we account for the lease and non-lease components as a single lease component. Some leases include escalation clauses and termination options that are factored in the determination of the lease payments when appropriate.

If a lease is modified after the effective date, the operating lease ROU asset and liability are re-measured using the current incremental borrowing rate. We review our incremental borrowing rate for our portfolio of leases on a quarterly basis. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, there were approximately $~~257,000~~153,000 and $~~786,000, respectively, of unoccupied lease charges. During the three and nine months ended September 30, 2021, there were approximately $220,000~~ ~~and $686,000~~263,000, respectively, of unoccupied lease charges for two of the Company’s facilities. During the ~~nine months~~quarter ended ~~September 30,~~March 31, 2022, there was a gain on lease termination of approximately $105,000. ~~During the nine months ended September 30, 2021, the Company recorded approximately $775,000~~ ~~of impairment charges on a vendor contract.~~

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023, the Miami office lease that we assumed in connection with an acquisition ended and we entered into a new lease arrangement with the landlord for significantly less office space. Charges of approximately $71,000 were incurred as a result of vacating the former premises. During the year ended December 31, 2022, a facility lease was terminated in conjunction with the Company ceasing its document storage services resulting in additional costs for the three months ended March 31, 2023, of approximately $~~51,000~~45,000 ~~and $248,000, respectively.~~. This amount is included in ~~Net~~net loss on lease terminations ~~impairment~~ and unoccupied lease charges in the consolidated statements of operations.

During the third quarter of 2021, the Company decided to terminate one of its leases in Pakistan which expired as of the end of the year. The Company did not renew this lease and consolidated its employees into the remaining facilities. As a result of the termination, the Company incurred a loss of approximately $~~18,000~~ ~~which has been included in Net loss on lease termination, impairment and unoccupied lease charges in the September 30, 2021 consolidated statements of operations.~~

Lease expense is included in direct operating costs and general and administrative expenses in the consolidated statements of operations based on the nature of the expense. As of ~~September 30, 2022,~~March 31, 2023, we had 3231 leased properties, five in Medical Practice Management and 2726 in Healthcare IT, with remaining terms ranging from less than one year to ~~fourteen~~thirteen years. Our lease terms are determined taking into account lease renewal options, the Company’s anticipated operating plans and leases that are on a month-to-month basis. The Company also has some related party leases – see Note 9.8.

	2022		2021		2022		2021		2023		2022
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
	($ in thousands)								($ in thousands)
Operating lease cost	$	921	$	1,066	$	2,798	$	3,181	$	801	$	972
Short-term lease cost		4		22		79		65		-		40
Variable lease cost		5		11		24		25		5		9
Total-net lease cost	$	930	$	1,099	$	2,901	$	3,271
Total - net lease cost									$	806	$	1,021

Short-term lease cost represents leases that were not capitalized as the lease term as of the later of January 1, ~~2022~~2023 or the beginning of the lease was less than 12 months. Variable lease costs include utilities, real estate taxes and common area maintenance costs.

	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
	($ in thousands)						($ in thousands)
Operating leases:
Operating lease ROU assets, net	$	4,679		$	6,940		$	4,465		$	4,921

Current operating lease liabilities	$	2,554		$	3,963		$	2,095		$	2,273
Non-current operating lease liabilities		2,907			4,545			2,822			3,207
Total operating lease liabilities	$	5,461		$	8,508		$	4,917		$	5,480

Operating leases:
ROU assets	$	7,242		$	10,535		$	5,207		$	8,293
Asset lease expense		(2,474	)		(3,574	)		(683	)		(3,286	)
Foreign exchange loss		(89	)		(21	)		(59	)		(86	)
ROU assets, net	$	4,679		$	6,940		$	4,465		$	4,921
Operating lease right-of-use assets	$	4,679		$	6,940

Weighted average remaining lease term (in years):
Operating leases		4.95			4.26			4.3			5.1
Weighted average discount rate:
Operating leases		7.02	%		6.76	%		10.1	%		7.9	%
Weighted average discount rate: Operating leases		7.02	%		6.76	%

	2022		2021		2022		2021		2023		2022
	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
	($ in thousands)								($ in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,228	$	1,316	$	3,598	$	4,048	$	907	$	1,212

ROU assets obtained in exchange for lease liabilities:
Operating leases, excluding impairments and terminations	$	71	$	315	$	513	$	2,063	$	287	$	427

Legal Proceedings — On ~~May 30, 2018, the Superior Court~~December 9, 2022, an arbitrator rendered a decision in favor of ~~New Jersey, Chancery Division, Somerset County (the “Chancery Court”) denied CareCloud’s and~~ MTBC Acquisition Corp.’s (“~~MAC’s”~~MAC”) ~~request to enjoin an arbitration proceeding demanded~~and dismissed the claims brought against MAC by Randolph Pain Relief and Wellness Center (“RPRWC”) ~~related~~, determining that RPRWC failed to ~~RCM services provided by parties unaffiliated with CareCloud or MAC. On June 15, 2018, CareCloud and MAC filed an appeal~~prove any breach of the Chancery Court’s decision with the New Jersey Superior Court, Appellate Division. On July 19, 2018, the Chancery Court ordered that the arbitration be stayed pending CareCloud’s and MAC’s appeal. On appeal, CareCloud and MAC contended they were never party to theapplicable billing services agreement ~~giving rise~~and failed to prove that any alleged damages were due. The deadline for RPRWC to file a summary action in Superior Court of New Jersey seeking to overturn the ~~arbitration claim, did not assume~~arbitrator’s decision was April 5, 2023 and no summary action was filed by such deadline. As such, the obligations of Millennium Practice Management Associates, Inc. (“MPMA”) under such agreement, and any agreement to arbitrate disputes arising under such agreement did not apply to CareCloud or MAC as RPRWC terminated the agreement before the applicable asset purchase agreement took effect. On January 30, 2019, the parties conducted oral arguments before the Appellate Division.arbitrator’s decision dismissing RPRWC’s claims is final.

On April 23, 2019, the Appellate Division affirmed in part and reversed in part the trial court’s order. The Appellate Division upheld the portion of the trial court’s order requiring MAC to participate in the arbitration based on the trial court’s finding that MAC had assumed MPMA’s contractual responsibilities. The Appellate Division reversed the trial court’s order requiring CareCloud to participate in the arbitration on the grounds that insufficient facts had been provided by RPRWC from which the court could conclude CareCloud was required to participate in the arbitration. As a result, the Appellate Division remanded the issue of whether Company is required to participate in the arbitration back to the trial court for further proceedings.

The parties completed discovery in the remanded matter on November 29, 2019, and thereafter both CareCloud and RPRWC filed cross-motions for summary judgment in their favor. On February 6, 2020, the Chancery Court denied RPRWC’s motion for summary judgment and granted CareCloud’s cross-motion for summary judgment. The Chancery Court held that CareCloud cannot be compelled to participate in the Arbitration. RPRWC has informed CareCloud that it does not intend to appeal the Chancery Court’s ruling and that it intends to move forward solely against MAC. On March 25, 2020, the Chancery Court lifted the stay of arbitration relative to RPRWC and MAC. In its arbitration demand, RPRWC alleges that MPMA, a subsidiary of MediGain, LLC, breached the terms of the billing services agreement the parties had entered into and sought compensatory damages of $~~6.6~~ ~~million and costs.~~

On May 28, 2020, the arbitrator handling the matter conducted a scheduling conference with the parties in order to establish deadlines for the parties to exchange discovery requests and responses. During the conference, the arbitrator directed RPRWC to produce a statement of damages on which it bases its claim. RPRWC disclosed its statement of damages to MAC on June 12, 2020. RPRWC’s June 12, 2020 statement of damages increased its alleged damages from $~~6.6~~ ~~million and costs to $~~20 ~~million and costs. On July 24, 2020, RPRWC disclosed a declaration to MAC, in which RPRWC estimates its damages to be approximately $~~11 ~~million plus costs. RPRWC then served expert reports in November 2021, whereby RPRWC’s expert alleged that damages were estimated to be in the range of $9.8~~ ~~million to $10.8~~ million. MAC has served an expert report refuting the alleged damages. A hearing was held in this matter over four days in June 2022. Testimony regarding alleged damages, and MAC’s defenses and refutation of the alleged damages thereto, was given at the hearing in line with the expert reports exchanged in discovery. Written closing arguments were submitted by both parties to the arbitrator in October 2022.

While the allegations of breach of contract made by RPRWC are the subject of the ongoing legal proceedings, MAC believes RPRWC’s allegations lack merit on numerous grounds. MAC continues to vigorously defend against RPRWC’s claim and is currently awaiting the arbitrator’s ruling. Based on RPRWC’s most recent calculation of its claimed damages, the possible loss arising from this matter may be between $0 ~~to $10.8~~ million. However, since MAC is not a significant subsidiary of CareCloud pursuant to Rule 1-02(w) of Regulation S-X, and CareCloud is not a party to this proceeding, we do not expect any outcome to have a material impact on the Company’s consolidated financial statements.

From time to time, we may become involved in other legal proceedings arising in the ordinary course of our business. ~~Including the proceeding described above, we~~We are not presently a party to any legal proceedings that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, consolidated results of operations, financial position or cash flows of the Company.

The Company had sales to a related party, a physician who is the wife of the Executive Chairman. Revenues from this customer were approximately $~~16,000~~19,000 and $~~15,000~~ ~~for the nine months ended September 30, 2022 and 2021, respectively and $~~5,000 ~~and $6,000~~ for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. As of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, the accounts receivable balance due from this customer was approximately $~~6,000~~9,000 and $~~3,000~~10,000, ~~respectively.~~

~~The Company was a party to a nonexclusive aircraft dry lease agreement with Kashmir Air, Inc. (“KAI”), which was owned by the Executive Chairman. The Company recorded an expense of approximately $20,000~~respectively, and $~~80,000~~ for the three and nine months ended September 30, 2021, respectively. The lease for the aircraft was renewed as of April 1, 2021 and terminated on August 31, 2021. As a result of the lease termination, the Company incurred a loss of approximately $~~185,000, which has been~~is included in ~~Net loss on lease termination, impairment and unoccupied lease charges~~accounts receivable - net in the ~~September 30, 2021~~ consolidated ~~statements of operations. As of September 30, 2022, there was no liability outstanding to KAI.~~balance sheets.

The Company leases its corporate offices in New Jersey, ~~its~~a temporary housing apartment for ~~its~~ foreign visitors, a ~~printing and mailing~~storage facility, ~~and~~ its ~~backup~~ operations center in Bagh, Pakistan and an apartment for temporary housing in Dubai, the UAE, from the Executive Chairman. The related party rent expense for ~~the nine months ended September 30, 2022 and 2021 was approximately $149,000~~ ~~and $140,000, respectively, and was approximately $49,000~~ ~~and $47,000~~ ~~for~~both the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021, respectively,~~was approximately $51,000, and is included in direct operating costs, general and administrative expense and research and development expense in the consolidated statements of operations. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company spent approximately $~~633,000~~502,000 and $~~1.4~~288,000 ~~million~~ to upgrade the related party leased facilities. Current assets-related party in the consolidated balance sheets includes security deposits related to the leases of the Company’s corporate offices in the amount of approximately $16,000 ~~and $13,000~~ as of ~~September 30, 2022~~both March 31, 2023 and December 31, ~~2021, respectively.~~2022.

Included in the ROU asset at ~~September 30, 2022~~March 31, 2023 is approximately $~~360,000~~390,000 applicable to the related party leases. Included in the current and non-current operating lease liability at ~~September 30, 2022~~March 31, 2023 is approximately $~~183,000~~154,000 and $~~171,000~~229,000, respectively, applicable to the related party leases.

Included in the ROU asset at December 31, ~~2021~~2022 is approximately $~~483,000~~467,000 applicable to the related party leases. Included in the current and non-current operating lease liability at December 31, ~~2021~~2022 is approximately $~~174,000~~158,000 and $~~305,000~~301,000, respectively, applicable to the related party leases.

During June 2022, the Company entered into a one-year consulting agreement with an entity owned and controlled by one of its non-independent directors whereby the director received 10,000 shares of the Company’s 8.75% Series B Cumulative Redeemable Perpetual Preferred Stock (“Series B Preferred Stock”) in exchange for assisting the Company to identify and acquire additional companies, including performing due diligence. In addition, the Company may make additional payments under the agreement for any successful acquisitions by the Company based on the purchase price of the transaction. No such additional payments were made in 2022. During February 2023, the agreement was amended and extended through December 2024 whereby the director received 14,000 shares of Series B Preferred Stock in February 2023 and will receive an additional 14,000 shares in January 2024. All of the payments made were capitalized and are being amortized over the service period. The amortization is recorded as stock compensation in General and Administrative expense in the consolidated statement of operations. All such shares of the Series B Preferred Stock are or will be issued in accordance with the Company’s Amended and Restated Equity Incentive Plan. In addition to the extension of the consulting agreement, the amendment provides that any transaction fees due will be offset against the last two above payments before any amounts are due to the director.

During 2020, a New Jersey corporation, talkMD Clinicians, PA (“talkMD”), was formed by the wife of the Executive Chairman, who is a licensed physician, to provide telehealth services. talkMD was determined to be a variable interest entity (“VIE”) for financial reporting purposes because the entity will be controlled by the Company. As of ~~September 30, 2022,~~March 31, 2023, talkMD had not yet commenced operations. ~~Cumulatively,~~Through March 31, 2023, the Company has paid approximately $4,000 on behalf of talkMD for income taxes.

The Company has the right to sell up to $35 million of its Series B Preferred Stock using its preferred stock at-the-market facility (“ATM”). The underwriter receives 3% of the gross proceeds. During ~~2022,~~the three months ended March 31, 2023, the Company sold ~~1,299,216~~59,773 shares of ~~8.75%~~ ~~Series B Cumulative Redeemable Perpetual Preferred Stock (“~~Series B Preferred ~~Stock”)~~Stock and received net proceeds of approximately $~~30.3~~1.4 ~~million. This includes~~ million under this ATM facility. The Company also has the right to sell up to $~~198,406~~50 million of its common stock using a common stock ATM facility. The underwriters of the common stock ATM also receive 3% of the gross proceeds. During the three months ended March 31, 2023, no shares of common stock were issued under this ATM.

During the first quarter of 2022, the Company sold ~~under the Company’s at-the-market facility (“ATM”). The~~1,150,372 shares of Series B Preferred Stock ~~is listed on the Nasdaq Global Market under the symbol “MTBCO.” Dividends on the Series B Preferred Stock~~and received net proceeds of approximately $~~2.19~~26.6 ~~annually per share are cumulative from the date of issue and are payable each month when, as and if declared by the Company’s Board of Directors.~~million. On March 18, 2022, the Company used a portion of ~~the~~these proceeds ~~from selling Series B Preferred Stock~~ to redeem 800,000 shares of the Company’s 11% Series A Cumulative Redeemable Perpetual Preferred Stock (“Series A Preferred ~~Stock~~Stock”) for $25.00 per share, plus all accrued and unpaid dividends to, but not including, the redemption date.

Since November 4, 2020, the Company may redeem, at its option, the Series A Preferred Stock, in whole or in part, at a cash redemption price of $25.00 per share, plus all accrued and unpaid dividends to, but not including, the redemption date. The Series A Preferred Stock has no stated maturity, is not subject to any sinking fund or other mandatory redemption, and is not convertible into or exchangeable for any of the Company’s other securities. Holders of the Series A Preferred Stock have no voting rights except for limited voting rights if dividends payable on the Series A Preferred Stock are in arrears for eighteen or more consecutive or non-consecutive monthly dividend periods. If the Company were to liquidate, dissolve or wind up, the holders of the Series A Preferred Stock will have the right to receive $25.00 per share, plus any accumulated and unpaid dividends to, but not including, the date of payment, before any payment is made to the holders of the common stock.

Commencing on February 15, 2024 and prior to February 15, 2025, we may redeem, at our option, the Series B Preferred Stock, in whole or in part, at a cash redemption price of $25.75 per share, plus all accrued and unpaid dividends to, but not including, the redemption date. On or after February 15, 2025 and prior to February 15, 2026, we may redeem, at our option, the Series B Preferred Stock, in whole or in part, at a cash redemption price of $25.50 per share, plus all accrued and unpaid dividends to, but not including, the redemption date. On or after February 15, 2026 and prior to February 15, 2027, we may redeem, at our option, the Series B Preferred Stock, in whole or in part, at a cash redemption price of $25.25 per share, plus all accrued and unpaid dividends to, but not including, the redemption date. On or after February 15, 2027, we may redeem, at our option, the Series B Preferred Stock, in whole or in part, at a cash redemption price of $25.00 per share, plus all accrued and unpaid dividends to, but not including, the redemption date.

~~The Company has the right to sell up to $~~35 ~~million of its Series B Preferred Stock using its ATM facility. The underwriter receives~~ 3% ~~of the gross proceeds. The Company also has the right to sell up to $~~50 ~~million of its common stock using a second ATM facility. The underwriters of the common stock ATM also receive~~ 3% ~~of the gross proceeds. During the nine months ended September 30, 2022,~~ no ~~shares of common stock were issued under this ATM.~~

~~During the nine months ended September 30, 2021,~~ ~~858,000~~ ~~common stock warrants were exercised at $7.50~~ ~~each resulting in gross proceeds of $6,435,000. During the second quarter of 2021, the Company sold~~ ~~178,092~~ ~~shares of common stock under its ATM and received net proceeds of approximately $1.4~~ ~~million. Also, during the second quarter of 2021, the Company cancelled~~ ~~215,822~~ ~~shares of preferred stock that were held in escrow from the CCH acquisition as the matters related to the escrow were settled in cash. During the third quarter of 2021, the Company sold~~ ~~136,395~~ ~~shares of common stock and received net proceeds of approximately $1.2~~ ~~million. On October 11, 2022,~~ ~~9,072~~ ~~common stock warrants were exercised.~~

The Company accounts for revenue in accordance with ASC 606, Revenue from Contracts with Customers. All revenue is recognized as our performance obligations are satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account under ASC 606. ~~For~~The Company recognizes revenue when the revenue cycle management services ~~the Company recognizes revenue when services~~ begin on the medical billing claims, which is generally upon receipt of the claim from the provider. For many services, the Company recognizes revenue as a percentage of the amount the customer collects on the medical billing claims. The Company’s software is utilized at the time the provider sees the patient, and the Company estimates the value of the consideration it will earn over the remaining contractual period as our services are provided and recognizes the fees over the term; this estimation involves predicting the amounts our clients will ultimately collect associated with the services they provided. Certain significant estimates, such as payment-to-charge ratios, effective billing rates and the estimated contractual payment periods are required to measure revenue cycle management revenue under the standard.

Most of our current contracts with customers contain a single performance obligation. For contracts where we provide multiple services, such as where we perform multiple ancillary services, each service represents its own performance obligation. The standalone selling prices are based on the contractual price for the service.

We apply the portfolio approach as permitted by ASC 606 as a practical expedient to contracts with similar characteristics and we use estimates and assumptions when accounting for those portfolios. Our contracts generally include standard commercial payment terms. We have no significant obligations for refunds, warranties or similar obligations and our revenue does not include taxes collected from our customers.

We derive revenue from five primary sources: (1) technology-enabled business solutions, (2) professional services, (3) printing and mailing services, (4) group purchasing services and (5) medical practice management services.

The following table represents a disaggregation of revenue for the three ~~and nine~~ months ended ~~September 30:~~March 31:

	2022		2021		2022		2021
	Three Months Ended				Nine Months Ended				2023		2022
	September 30,				September 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
	($ in thousands)								($ in thousands)
Healthcare IT:
Technology-enabled business solutions	$	21,626	$	27,086	$	68,457	$	80,076	$	19,495	$	23,242
Professional services		7,434		6,863		25,572		10,978		6,560		8,314
Printing and mailing services		594		429		1,515		1,084		713		463
Group purchasing services		310		300		602		659		186		134
Medical Practice Management:
Medical practice management services		3,759		3,626		10,146		9,340		3,047		3,188
Total	$	33,723	$	38,304	$	106,292	$	102,137	$	30,001	$	35,341
Revenues	$	33,723	$	38,304	$	106,292	$	102,137	$	30,001	$	35,341

Revenue derived on an on-going basis from our technology-enabled solutions, which typically include revenue cycle management services, is ~~typically~~ billed as a percentage of payments collected by our customers. The fee for our services often includes the ability to use our EHR and practice management software as well as RCM as part of the bundled fee.

~~Revenue~~Technology-assisted revenue cycle management services are the recurring process of submitting and following up on claims with health insurance companies in order for the healthcare providers to receive payment for the services they rendered. The Company typically invoices customers on a monthly basis based on the actual collections received by its customers and the agreed-upon rate in the sales contract. The fee for these services typically includes use of practice management software and related tools (on a SaaS basis), electronic health records (on a SaaS basis), medical billing services and use of mobile health solutions. We consider the services to be one performance obligation since the promises are not distinct in the context of the contract. The performance obligation consists of a series of distinct services that are substantially the same and have the same periodic pattern of transfer to our customers.

In many cases, our clients may terminate their agreements with 90 days’ notice without cause, thereby limiting the term in which we have enforceable rights and obligations, although this time period can vary between clients. Our payment terms are normally net 30 days. Although our contracts typically have stated terms of one or more years, under ASC 606 our contracts are considered month-to-month and accordingly, there is no financing component.

For the majority of our revenue cycle management contracts, the total transaction price is variable because our obligation is to process an unknown quantity of claims, as and when requested by our customers over the contract period. When a contract includes variable consideration, we evaluate the estimate of the variable consideration to determine whether the estimate needs to be constrained; therefore, we include variable consideration in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with variable consideration is subsequently resolved. Estimates to determine variable consideration such as payment to charge ratios, effective billing rates, and the estimated contractual payment periods are updated at each reporting date. Revenue is recognized over the performance period using the input method.

Our proprietary, cloud-based practice management application automates the labor-intensive workflow of a medical office in a unified and streamlined SaaS platform. The Company has a large number of clients who utilize the Company’s practice management software, electronic health records software, patient experience management solutions, business intelligence software and/or robotic process automation software on a SaaS basis, but who do not utilize the Company’s revenue cycle management services. SaaS fees may be fixed based on the number of providers, or may be variable.

The medical billing clearinghouse service takes claim information from customers, checks the claims for errors and sends this information electronically to insurance companies. The Company invoices customers on a monthly basis based on the number of claims submitted and the agreed-upon rate in the agreement. This service is provided to medical practices and providers to medical practices who are not revenue cycle management customers. The performance obligation is satisfied once the relevant submissions are completed.

Additional services such as coding ~~credentialing~~ and transcription are ~~sometimes~~ rendered in connection with the delivery of revenue cycle management and related medical services. The Company invoices customers monthly, based on the actual amount of services performed at the agreed-upon rate in the contract. These services are only offered to revenue cycle management customers. These services do not represent a material right because the services are optional to the customer and customers electing these services are charged the same price for those services as if they were on a standalone basis. Each individual coding ~~credentialing~~ or transcription transaction processed represents a performance obligation, which is satisfied over time as that individual service is rendered.

Our digital health services, which began generating revenue in mid-2022, include chronic care management, where a care manager conducts remote visits with patients with one or more chronic conditions under the supervision of a physician who is our client. It also includes remote patient monitoring where our system monitors recordings from FDA-approved internet connected devices. These devices record patient trends and alerts the physician to changes which might trigger the need for additional follow-up visits. The performance obligation for chronic care management is satisfied at a point in time once the patient receives the services. The performance obligation for remote patient monitoring is satisfied over time as the patient receives the services. The revenue for these services for the three months ended March 31, 2023 was approximately $146,000.

Our professional services include an extensive set of services including EHR vendor-agnostic optimization and activation, project management, IT transformation consulting, process improvement, training, education and staffing for large healthcare organizations including health systems and hospitals. Revenue is recorded monthly on a time and materials or a fixed rate basis. This is a separate performance obligation from any RCM or SaaS services provided, for which the Company receives and records monthly fees. The performance obligation is satisfied over time using the input method. The revenue is recorded on a monthly basis as the professional services are rendered.

The Company provides printing and mailing services for both revenue cycle management customers and a non- revenue cycle management customer, and invoices on a monthly basis based on the number of prints, the agreed-upon rate per print and the postage incurred. The performance obligation is satisfied once the printing and mailing is completed.

The Company provides group purchasing services which enable medical providers to purchase various vaccines directly from selected pharmaceutical companies at a discounted price. Currently, there are approximately 4,000 medical providers who are members of the program. Revenue is recognized as the vaccine shipments are made to the medical providers. Fees from the pharmaceutical companies are paid either quarterly or annually and the Company adjusts its revenue accrual at the time of payment. The Company makes significant judgments regarding the variable consideration which we expect to be entitled to for the group purchasing services which includes the anticipated shipments to the members enrolled in the program, anticipated volumes of purchases made by the members, and the changes in the number of members. The amounts recorded are constrained by estimates of decreases in shipments and loss of members to avoid a significant revenue reversal in the subsequent period. The only performance obligation is to provide the pharmaceutical companies with the medical providers who want to become members in order to purchase vaccines. The performance obligation is satisfied once the medical provider agrees to purchase a specific quantity of vaccines and the medical provider’s information is forwarded to the vaccine suppliers. The Company records a contract asset for revenue earned and not paid as the ultimate payment is conditioned on achieving certain volume thresholds.

For all of the above revenue streams other than group purchasing services, revenue is recognized over time, which is ~~typically~~approximately one month, ~~or less,~~ which closely matches the point in time that the customer simultaneously receives and consumes the benefits provided by the Company. For the group purchasing services, revenue is recognized at a point in time. Each service is substantially the same and has the same periodic pattern of transfer to the customer. Each of the services provided above is considered a separate performance obligation.

The Company also provides medical practice management services under long-term management service agreements to three medical practices. We provide the medical practices with the nurses, administrative support, facilities, supplies, equipment, marketing, RCM, accounting, and other non-clinical services needed to efficiently operate their practices. Revenue is recognized as the services are provided to the medical practices. Revenue recorded in the consolidated statements of operations represents the reimbursement of costs paid by the Company for the practices and the management fee earned each month for managing the practice. The management fee is based on either a fixed fee or a percentage of the net operating income.

The Company assumes all financial risk for the performance of the managed medical practices. Revenue is impacted by the amount of the costs incurred by the practices and their operating income. The gross billing of the practices is impacted by billing rates, changes in current procedural terminology code reimbursement and collection trends which in turn impacts the management fee that the Company is entitled to. Billing rates are reviewed at least annually and adjusted based on current insurer reimbursement practices. The performance obligation is satisfied as the management services are provided.

Our contracts for medical practice management services have approximately an additional 2016 years remaining and are only cancellable under very limited circumstances. The Company receives a management fee each month for managing the day-to-day business operations of each medical group as a fixed fee or a percentage payment of the net operating income which is included in revenue in the consolidated statements of operations.

Our medical practice management services obligations consist of a series of distinct services that are substantially the same and have the same periodic pattern of transfer to our customers. Revenue is recognized over time, however for reporting and convenience purposes, the management fee is computed at each ~~month end.~~month-end.

As of ~~September 30, 2022,~~March 31, 2023, the estimated revenue expected to be recognized in the future related to the remaining revenue cycle management performance obligations outstanding was approximately $~~3.9~~4.6 million. We expect to recognize substantially all of the revenue for the remaining performance obligations over the next three months. Approximately $~~500,000~~439,000 of the contract asset represents revenue earned, ~~but~~ not ~~yet~~ paid, from the group purchasing services.

Amounts that we are entitled to collect under the applicable contract are recorded as accounts receivable. Invoicing is performed at the end of each month when the services have been provided. The contract asset includes our right to payment for services already transferred to a customer when the right to payment is conditional on something other than the passage of time. For example, contracts for revenue cycle management services where we recognize revenue over time but do not have a contractual right to payment until the customer receives payment of their claim from the insurance provider. The contract asset also includes the revenue accrued, not received, for the group purchasing services.

Changes in the contract asset are recorded as adjustments to net revenue. The changes primarily result from providing services to revenue cycle management customers that result in additional consideration and are offset by our right to payment for services becoming unconditional and changes in the revenue accrued for the group purchasing services. The contract asset for our group purchasing services is reduced when we receive payments from vaccine manufacturers and is increased for revenue earned, not received. The opening and closing balances of the Company’s accounts receivable, contract asset and deferred revenue are as follows:

Our sales incentive plans include commissions payable to employees and third parties at the time of initial contract execution that are capitalized as incremental costs to obtain a contract. The capitalized commissions are amortized over the period the related services are transferred. As we do not offer commissions on contract renewals, we have determined the amortization period to be the estimated client life, which is three years. Deferred commissions were approximately $~~692,000~~580,000 and $~~922,000~~846,000 at ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, and are included in the other assets amounts in the consolidated balance sheets.

ASU 2016-13 requires the recognition of lifetime estimated credit losses expected to occur for trade accounts receivable. The guidance also requires we pool assets with similar risk characteristics and consider current economic conditions when estimating losses. The adoption of the ASU 2016-13 for trade accounts receivable was recorded as a charge to accumulated deficit of approximately $186,000 as of January 1, 2023.

At adoption, we segmented the accounts receivable population into pools based on their risk assessment. Risks related to trade accounts receivable are a customer’s inability to pay or bankruptcy. Each pool was defined by their internal credit assessment and business size. The pools are aligned with management’s review of financial performance. For the three months ended March 31, 2023, no adjustment to the pools was necessary.

We utilize a loss-rate method to measure the expected credit loss for each pool. The loss rate is calculated using a three-year lookback period of write-offs and adjustments, divided by the revenue for each pool by aging category, net of customer payments during that period. We consider current and future economic conditions, internal forecasts, customer collection experience and credit memos issued during the current period when assessing loss rates. We reviewed these factors and concluded that no adjustments should be made to the historical loss rate data for the current quarter. In addition, the Company uses specific account identification in determining the total allowance for expected credit losses. Trade receivables are written off only after the Company has exhausted all collection efforts.

Changes in the allowance for expected credit losses for trade accounts receivable are presented in the table below:

In April 2014, the Company adopted the Medical Transcription Billing, Corp. 2014 Equity Incentive Plan (the “Original Plan”), reserving a total of 1,351,000 shares of common stock for grants to employees, officers, directors and consultants. On April 14, 2017, the Original Plan was amended and restated whereby an additional 1,500,000 shares of common stock and 100,000 shares of Series A Preferred Stock were added to the plan for future issuance (the “A&R Plan”). During 2018, an additional 200,000 shares of Series A Preferred Stock were added to the A&R Plan for future issuance. In May 2020, an additional 2,000,000 shares of common stock and an additional 300,000 shares of Series A Preferred Stock were added to the A&R Plan for future issuance. During 2022, an additional 1,000,000 shares of common stock and 200,000 shares of Series B Preferred Stock were added to the A&R Plan for future issuance. ~~Some of the Series A Preferred Stock shares were subsequently redesignated as Series B Preferred Stock and were removed from the A&R Plan.~~ As of ~~September 30, 2022,~~March 31, 2023, ~~1,621,747~~971,616 shares of common stock ~~33,769~~ ~~shares of Series A Preferred Stock~~ and ~~120,000~~38,000 shares of Series B Preferred Stock are available for grant. Permissible awards include incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, RSUs, performance stock and cash-settled awards and other stock-based awards in the discretion of the Compensation Committee of the Board of Directors including unrestricted stock grants.

~~The~~Certain equity-based ~~RSUs~~RSU agreements contain a provision in which the units shall immediately vest and become converted into common shares at the rate of one share per RSU, immediately after a change in control, as defined in the award agreement.

In February 2022, the Compensation Committee approved executive bonuses to be paid in shares of Series B Preferred Stock, with the number of shares and the amount based on specified criteria being achieved during the year 2022. ~~The actual amount of~~These shares ~~will be settled~~were awarded in early 2023 based on the achievement of the specified criteria.

In February 2023, the Compensation Committee approved executive bonuses to be paid in shares of Series B Preferred Stock with the number of shares and the amount based on specified criteria being achieved during the year 2023. For the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, an expense of approximately $~~644,000~~123,000 was recorded for these bonuses based on the value of the shares at the grant date and recognized over the service period. The portion of the stock compensation expense to be used for the payment of withholding and payroll taxes is included in accrued compensation in the consolidated balance sheets. The balance of the stock compensation expense has been recorded as additional paid-in capital.

The following table summarizes the RSU transactions related to the common and preferred stock under the A&R Plan for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

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

The liability for the ~~80,850~~43,597 cash-settled awards and the liability for withheld taxes in connection with the equity awards was approximately $~~755,000~~246,000 and $1.0 million at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively, and is included in accrued compensation in the consolidated balance sheets. During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, ~~and 2021,~~ approximately $13,000 ~~and $97,000, respectively,~~ was paid in connection with the cash-settled awards.No

amounts were paid in connection with cash-settled awards during the quarter ended March 31, 2023.

The Company recognizes compensation expense on a straight-line basis over the total requisite service period for the entire award. For stock awards classified as equity, the market price of our common stock or preferred stock on the date of grant is used in recording the fair value of the award and includes the related taxes. For stock awards classified as a liability, the earned amount is marked to market based on the end of period common stock price.

The following table summarizes the components of share-based compensation expense for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Stock-based compensation included in the consolidated statements of operations:

SCHEDULE OF EMPLOYEE SERVICE SHARE-BASED COMPENSATION, ALLOCATION OF RECOGNIZED PERIOD COSTS

The income tax expense for the three months ended ~~September 30, 2022~~March 31, 2023 was approximately $~~55,000~~65,000 comprised of a current tax expense of $~~20,000~~39,000 and a deferred tax expense of $~~35,000~~26,000. The income tax expense for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 was approximately $~~144,000~~64,000, comprised of a current tax expense of $~~82,000~~28,000 and a deferred tax expense of $~~62,000~~36,000.

The current income tax ~~benefit~~provision for the three months ended ~~September 30, 2021 was approximately $232,000, comprised of a current tax benefit of $245,000~~March 31, 2023 and a2022 primarily relates to state minimum taxes and foreign income taxes. The deferred tax ~~expense of $13,000. The Company filed a carryback claim for approximately $285,000~~ ~~with the Internal Revenue Service to recover taxes previously paid by Meridian prior to its acquisition of Meridian. The income tax benefit~~provision (benefit) for the ~~nine~~three months ended ~~September 30, 2021 was approximately $20,000, comprised~~March 31, 2023 and 2022 relates to the book and tax difference of ~~a current tax benefit of $160,000~~ ~~and a~~amortization on indefinite-lived intangibles, primarily goodwill. To the extent allowable, the federal deferred tax ~~expense of $140,000~~.provision has been offset by the indefinite life net operating loss.

During ~~the quarter ended June 30,~~ 2022, it was determined that for the states that follow the federal rules regarding indefinite life net operating losses, the offset to the state deferred tax liability was approximately $45,000. This amount was recorded as a deferred tax benefit during the second quarter of 2022.

~~The current income tax provision for~~ Subsequently, the ~~nine months ended September 30, 2022 and 2021 primarily relates to~~ state ~~minimum taxes and foreign income taxes. The~~ deferred tax provision (benefit) for the three and nine months ended September 30, 2022 and 2021 relates to the book and tax difference of amortization on indefinite-lived intangibles, primarily goodwill. To the extent allowable, the federal deferred tax provisionliability has been offset byagainst the ~~indefinite life~~state net operating ~~loss.~~loss to the extent allowable.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security ~~(CARES)~~(“CARES”) Act was signed into law. Several new corporate tax provisions were included in the CARES Act, including, but not limited to, the following: increasing the limitation threshold for determining deductible interest expense, class life changes to qualified improvements (in general - from 39 ~~years to~~ 15 ~~years), and~~ ~~the ability to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years. The Company has evaluated the income tax provisions of the CARES Act and determined the impact to be either immaterial or not applicable.~~ Under the CARES Act, the Company took advantage of the payroll tax deferral provision. AsIn 2022, the remainder of ~~both September 30, 2022 and December 31, 2021,~~ the ~~Company has~~ deferred payroll taxes of approximately $934,000 ~~of payroll taxes. This amount needs to be repaid by December 31, 2022.~~ were paid.

The Company has incurred cumulative losses, which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against the federal and state deferred tax assets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The fair values of assets and liabilities required to be measured at fair value are categorized based upon the level of judgement associated with the inputs used to measure their value in one of the following three categories:

Level 1: Inputs are unadjusted quoted prices in active markets for identical assets or liabilities. We held no Level 1 financial instruments at ~~September 30, 2022~~March 31, 2023 or December 31, ~~2021.~~2022.

Level 2: Quoted prices for similar instruments in active markets with inputs that are observable, either directly or indirectly. Our Level 2 financial instruments include notes payable which are carried at cost and approximate fair value since the interest rates being charged approximate market rates.

Level 3: Unobservable inputs are significant to the fair value of the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. Our Level 3 ~~instrument includes~~instruments include the fair value of contingent consideration related to completed acquisitions. ~~Given that~~The fair value at March 31, 2022 is based on discounted cash flow analysis reflecting the likelihood of achieving specified performance measure or events and captures the contractual nature of the contingencies, the passage of time and the associated discount rate. As of March 31, 2022, the contingent consideration was valued using a Monte Carlo simulation model. There was no contingent consideration recorded at March 31, 2023 or December 31, 2022 as the earn-out period ~~concludes on~~ended November 30, 2022 and no amounts were determined payable to the ~~Company determined its best estimate of~~seller as they did not meet the ~~contingent consideration liability based on its projections and actual performance to date.~~contractual terms.

The following table provides a reconciliation of the beginning and ending balances for the contingent consideration measured at fair value using significant unobservable inputs (Level 3):

SCHEDULE OF FAIR VALUE, LIABILITIES MEASURED ON RECURRING BASIS, UNOBSERVABLE INPUT RECONCILIATION

The Company’s Chief Executive Officer and Executive Chairman jointly serve as the Chief Operating Decision Maker (“CODM”), organize the Company, manage resource allocations and measure performance among two operating and reportable segments: (i) Healthcare IT and (ii) Medical Practice Management.

The Healthcare IT segment includes revenue cycle management, SaaS solutions and other services. The Medical Practice Management segment includes the management of three medical practices. Each segment is considered a reporting unit. The CODM evaluates the financial performance of the business units on the basis of revenue and direct operating costs excluding unallocated amounts that are mainly corporate overhead costs. Our CODM does not evaluate operating segments using asset or liability information. The accounting policies of the segments are the same as those disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC on March ~~14, 2022.~~2, 2023. The following table presents revenues, operating expenses and operating income (loss) by reportable segment:

SCHEDULE OF REVENUES, OPERATING EXPENSES AND OPERATING INCOME (LOSS) BY REPORTABLE SEGMENT

												Healthcare IT			Medical Practice Management			Unallocated Corporate Expenses			Total
	Three Months Ended September 30, 2022											Three Months Ended March 31, 2022
	($ in thousands)											($ in thousands)
	Healthcare IT			Medical Practice Management		Unallocated Corporate Expenses			Total			Healthcare IT			Medical Practice Management			Unallocated Corporate Expenses			Total
Net revenue	$	29,964		$	3,759	$	-		$	33,723		$	32,153		$	3,188		$	-		$	35,341
Operating expenses:
Direct operating costs		17,582			2,824		-			20,406			20,011			2,662			-			22,673
Selling and marketing		2,496			8		-			2,504			2,376			8			-			2,384
General and administrative		3,231			455		2,814			6,500			3,400			437			1,748			5,585
Research and development		1,168			-		-			1,168			985			-			-			985
Change in contingent consideration		(1,660	)		-		-			(1,660	)		(600	)		-			-			(600	)
Depreciation and amortization		2,721			89		-			2,810			2,852			88			-			2,940
Loss on lease termination and unoccupied lease charges		307			-		-			307
Net loss on lease termination and unoccupied lease charges													158			-			-			158
Total operating expenses		25,845			3,376		2,814			32,035			29,182			3,195			1,748			34,125
Operating income (loss)	$	4,119		$	383	$	(2,814	)	$	1,688		$	2,971		$	(7	)	$	(1,748	)	$	1,216

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our consolidated financial condition and results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read together with our Consolidated Financial Statements and related notes beginning on page 4 of this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, filed with the SEC on March ~~14, 2022~~2, 2023.

Some of the statements set forth in this section are forward-looking statements relating to our future results of operations. Our actual results may vary from the results anticipated by these statements. Please see “Forward-Looking Statements” on page 2 of this Quarterly Report on Form 10-Q.

~~While~~In response to the COVID-19 pandemic, ~~did~~we implemented a business continuity plan to respond quickly and provide ongoing guidance so that we could continue offering our clients uninterrupted products, services and support while also protecting our employees. We believe these actions have been successful and that the pandemic, and our responses, have not ~~materially adversely affect the Company’s consolidated~~significantly affected our financial results ~~and operations during~~for the three ~~and nine~~ months ended ~~September 30, 2022, economic and health conditions in the United States and across most of the globe continue to change.~~March 31, 2023.

~~The COVID-19 pandemic affected~~Refer to Part I, Item 1A. Risk Factors, Risks Related to Our Business in the Company’s operations in 2021 and may continue to do so indefinitely in the future. The pandemic may have an impact on the Company’s business, operations, and financial results and conditions, directly and indirectly, including, without limitation, impacts on the health of the Company’s management and employees, its operations, marketing and sales activities, and on the overall economy. The spread of the virus did not adversely affect the health and availability of our employees and staff. The scope and nature of these impacts, most of which are beyond the Company’s control, continue to evolve and the outcomes are uncertain.

~~Due to the above circumstances and as described generally in this Quarterly~~Annual Report on Form ~~10-Q,~~10-K filed with the ~~Company’s consolidated results of operations~~SEC on March 2, 2023 for ~~the three and nine months ended September 30, 2022 may not necessarily be indicative~~further discussion of the results to be expected for the full fiscal year. The Company is not aware of any certain event or circumstance that would require an update to its estimates or judgements or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q. These estimates could change in the future as new information about future developments is obtained. Management cannot predict the futurepotential impact of the COVID-19 pandemic on ~~the Company’s consolidated operations nor on economic conditions generally, including the effects on patient visits.~~ our business.

The ~~ultimate extent~~Company maintains cash balances at Silicon Valley Bank (“SVB”), a division of First-Citizens Bank & Trust Company in excess of the ~~effects~~FDIC insurance coverage limits. The Company performs periodic evaluation of the ~~COVID-19 pandemic on~~relative credit standing of this financial institutions to ensure its credit worthiness. As of March 31, 2023 and December 31, 2022, the Company ~~is uncertain~~held cash of approximately $1.4 million and ~~will depend on highly unpredictable factors such as~~$1.8 million, respectively, in the ~~ultimate geographic spread~~name of ~~the disease, the severity of the disease, the duration of outbreak, and the effectiveness of any further developments globally and nationally.~~its subsidiaries at bank in Pakistan And Sri Lanka. The banking systems in these countries do not provide deposit insurance coverage. The Company ~~will actively monitor the situation and take further action that is in the best interest of our employees, customers, partners, and stockholders.~~has not experienced any losses on its cash accounts.

The Company is a healthcare information technology company that provides ~~Software-as-a-Service offerings (“SaaS”)~~technology-enabled revenue cycle management and ~~technology-enabled business~~a full suite of proprietary cloud-based solutions ~~which are often bundled, but are occasionally provided individually, together with related business services~~ to healthcare providers, from small practices to enterprise medical groups, hospitals, and ~~hospitals~~health systems throughout the United States. Our integrated ~~SaaS~~Software-as-a-Service (“SaaS”) platform includes revenue cycle management (“RCM”), practice management (“PM”), electronic health record (“EHR”), business intelligence, telehealth, patient experience management (“PXM”) solutions and complementary software tools and business services for high-performance medical groups and health systems.

~~At a high level, these~~Our technology-enabled business solutions can be categorized as follows:

Our solutions enable clients to increase financial and operational performance, streamline clinical workflows, get better insight through data, and make better business and clinical decisions, resulting in improvement in patient care and collections while reducing administrative burdens and operating costs.

The modernization of the healthcare industry is transforming nearly every aspect of a healthcare organization from policy to providers, clinical care to member services, devices to data, and ultimately the quality of the patient’s experience as a healthcare consumer. We create elegant, user-friendly applications that solve many of the challenges facing healthcare organizations. We partner with organizations to develop customized, best-in-class solutions to solve their specific challenges while ensuring they also meet future regulatory and organizational requirements and market demands.

We are able to deliver our industry-leading solutions at very competitive prices because we leverage a combination of our proprietary software, which automates our workflows and increases efficiency, together with our team of approximately 500 experienced health industry experts throughout the United States. These experts are supported by our highly educated and specialized offshore workforce of approximately~~3,700~~ 3,500 team members ~~at labor costs~~ that ~~we believe~~ are approximately ~~one-tenth~~13% of the cost of ~~comparable~~comparably educated and skilled workers in the U.S. ~~employees.~~ Our u~~nique~~unique business model also allowed us to become a leading consolidator in our industry sector, gaining us a reputation for acquiring and positively transforming distressed competitors into profitable operations of ~~CareCloud~~.CareCloud.

Adoption of our technology-enabled business solutions typically requires little or no upfront expenditure by a client. Additionally, for most of our solutions and customers, our financial performance is linked directly to the financial performance of our clients, as the vast majority of our revenues are based on a percentage of our clients’ collections. The fees we charge for our complete, integrated, end-to-end solution are very competitive and among the lowest in the industry. We estimate that we currently provide services to approximately 40,000 providers, (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services) practicing in approximately 2,600 independent medical practices and hospitals representing 80 specialties and subspecialties in 50 states. In addition, we serve approximately ~~200~~150 clients that are not medical practices, but are primarily service organizations who serve the healthcare community. The foregoing numbers include clients leveraging any of our products or services, and are based, in part, upon estimates where the precise number of practices or providers is unknown.

We service clients ranging from small practices, consisting of one to ten providers, to large practices with over ~~2,300~~3,000 providers operating in multiple states, to community hospitals.

On January 8, 2020, through a merger with a subsidiary, the Company acquired CareCloud Corporation, a Delaware corporation which was subsequently renamed CareCloud Health, Inc. (“CCH”), which has developed a highly acclaimed cloud-based platform including EHR, PM and patient experience capabilities. The Company paid $11.9 million in cash, assumed a working capital deficiency of approximately $5.1 million and issued 760,000 shares of the Company’s Series A Preferred Stock and two million warrants for the purchase of the Company’s common stock at prices of $7.50 for two years and $10.00 per share for three years.

On June 16, 2020, the Company purchased all of the issued and outstanding capital stock of Meridian Billing Management Co. and its affiliate Origin Holdings, Inc. (collectively, “Meridian,” and sometimes referred to as “Meridian Medical Management”), a former GE Healthcare IT company that delivers advanced healthcare information technology solutions and services. The Company paid $11.9 million in cash, issued 200,000 shares of the Company’s Series A Preferred Stock and warrants to purchase 2,250,000 of the Company’s common stock with an exercise price per share of $7.50 for two years and assumed Meridian’s negative working capital and certain long-term lease liabilities where the space is either not being utilized or will be vacated shortly, with an aggregate value of approximately $4.8 million.

On June 1, 2021, CareCloud Acquisition Corp (“CAC”), a wholly-owned subsidiary, entered into an Asset and Stock Purchase Agreement (the “Purchase Agreement”) with MedMatica Consulting Associates, Inc., (“MedMatica”) whereby CAC purchased the assets of MedMatica and the stock of its wholly-owned subsidiary Santa Rosa Staffing, Inc. (“SRS”). MedMatica and SRS provide a broad range of specialty consulting services to hospitals and large healthcare groups, including certain consulting services related to healthcare IT applications services and implementations, practice management, and revenue cycle management. The total consideration paid at closing was $10 million in cash, net of $1.5 million of escrow withheld. A working capital adjustment of approximately $3.8 million was also paid at closing. The Purchase Agreement provides that if during the 18-month period commencing on June 1, 2021 (“the “Earn-Out Period”), CAC’s EBITDA and revenue targets are achieved, then CAC shall pay an earn-out up to a maximum of $8 million (the “Base Earn-Out”). If during the Earn-Out Period, CAC’s additional and increased EBITDA and revenue targets are achieved, then CAC shall pay an additional earn-out, up to a maximum of $5 million (the “Additional Earn-Out”, collectively, with the Base Earn-Out, the “Earn-Out”). CAC will have the right to offset the Earn-Out against any claim for which CAC is entitled to indemnification under the Purchase Agreement and against damages for breaches by the seller of the non-competition and non-solicitation provisions in the Purchase Agreement.

Our offshore operations in the Pakistan Offices and Sri Lanka together accounted for approximately ~~12%~~13% and 11% of total expenses for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. A significant portion of those foreign expenses were personnel-related costs (approximately ~~80%~~81% for both the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021)~~2022). Because personnel-related costs are significantly lower in Pakistan and Sri Lanka than in the U.S. and many other offshore locations, we believe our offshore operations give us a competitive advantage over many industry participants. We are able to achieve significant cost reductions and leverage technology to reduce manual work and strategically transition a portion of the remaining manual tasks to our highly-specialized, cost-efficient team in the U.S., the Pakistan Offices and Sri Lanka.

We consider numerous factors in assessing our performance. Key performance measures used by management, including adjusted EBITDA, adjusted operating income, adjusted operating margin, adjusted net income and adjusted net income per share, are non-GAAP financial measures, which we believe better enable management and investors to analyze and compare the underlying business results from period to period.

These non-GAAP financial measures should not be considered in isolation, or as a substitute for or superior to, financial measures calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Moreover, these non-GAAP financial measures have limitations in that they do not reflect all the items associated with the operations of our business as determined in accordance with GAAP. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis, and we provide reconciliations from the most directly comparable GAAP financial measures to the non-GAAP financial measures. Our non-GAAP financial measures may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

Adjusted EBITDA, adjusted operating income, adjusted operating margin, adjusted net income and adjusted net income per share provide an alternative view of performance used by management and we believe that an investor’s understanding of our performance is enhanced by disclosing these adjusted performance measures.

Adjusted EBITDA excludes the following elements which are included in GAAP net ~~income~~ (loss): income:

Set forth below is a presentation of our adjusted EBITDA for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
	($ in thousands)												($ in thousands)
Net revenue	$	33,723		$	38,304		$	106,292		$	102,137		$	30,001		$	35,341

GAAP net income (loss)		1,056			1,505			4,933			(686	)
GAAP net (loss) income														(401	)		1,140

Provision (benefit) for income taxes		55			(232	)		144			(20	)
Provision for income taxes														65			64
Net interest expense		82			87			281			264			130			95
Foreign exchange loss / other expense		523			70			359			167
Foreign exchange gain														(8	)		(56	)
Stock-based compensation expense		1,328			1,004			3,399			4,006			1,072			887
Depreciation and amortization		2,810			3,547			8,686			9,505			3,038			2,940
Transaction and integration costs		316			269			724			1,118			72			102
Net loss on lease termination, impairment and unoccupied lease charges		307			424			928			1,664
Net loss on lease termination and unoccupied lease charges														269			158
Change in contingent consideration		(1,660	)		-			(2,890	)		-			-			(600	)
Adjusted EBITDA	$	4,817		$	6,674		$	16,564		$	16,018		$	4,237		$	4,730

Adjusted operating income and adjusted operating margin exclude the following elements that are included in GAAP operating ~~income~~ (loss): income:

Set forth below is a presentation of our adjusted operating income and adjusted operating margin, which represents adjusted operating income as a percentage of net revenue, for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
	($ in thousands)												($ in thousands)
Net revenue	$	33,723		$	38,304		$	106,292		$	102,137		$	30,001		$	35,341

GAAP net income (loss)		1,056			1,505			4,933			(686	)
Provision (benefit) for income taxes		55			(232	)		144			(20	)
GAAP net (loss) income														(401	)		1,140
Provision for income taxes														65			64
Net interest expense		82			87			281			264			130			95
Other expense - net		495			65			300			80
GAAP operating income (loss)		1,688			1,425			5,658			(362	)
Other income - net														(17	)		(83	)
GAAP operating (loss) income														(223	)		1,216
GAAP operating margin		5.0	%		3.7	%		5.3	%		(0.4	)%		(0.7	%)		3.4	%

Stock-based compensation expense		1,328			1,004			3,399			4,006			1,072			887
Amortization of purchased intangible assets		1,428			2,768			4,884			7,079			1,323			1,805
Transaction and integration costs		316			269			724			1,118			72			102
Net loss on lease termination, impairment and unoccupied lease charges		307			424			928			1,664
Net loss on lease termination and unoccupied lease charges														269			158
Change in contingent consideration		(1,660	)		-			(2,890	)		-			-			(600	)
Non-GAAP adjusted operating income	$	3,407		$	5,890		$	12,703		$	13,505		$	2,513		$	3,568
Non-GAAP adjusted operating margin		10.1	%		15.4	%		12.0	%		13.2	%		8.4	%		10.1	%

Adjusted net income and adjusted net income per share exclude the following elements which are included in GAAP net ~~income~~ (loss): income:

No tax effect has been provided in computing non-GAAP adjusted net income and non-GAAP adjusted net income per share as the Company has sufficient carry forward net operating losses to offset the applicable income taxes. The following table shows our reconciliation of GAAP net ~~loss~~(loss) income to non-GAAP adjusted net income for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Set forth below is a reconciliation of our GAAP net loss attributable to common shareholders, per share to our non-GAAP adjusted net income per share:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
GAAP net loss attributable to common shareholders, per share	$	(0.18	)	$	(0.15	)	$	(0.45	)	$	(0.77	)	$	(0.28	)	$	(0.19	)
Impact of preferred stock dividend		0.25			0.25			0.78			0.72			0.25			0.27
Net income (loss) per end-of-period share		0.07			0.10			0.33			(0.05	)
Net (loss) income per end-of-period share														(0.03	)		0.08

Foreign exchange loss / other expense		0.03			0.00			0.02			0.01
Foreign exchange gain														0.00			0.00
Stock-based compensation expense		0.09			0.07			0.23			0.27			0.07			0.06
Amortization of purchased intangible assets		0.09			0.19			0.31			0.48			0.09			0.11
Transaction and integration costs		0.02			0.02			0.05			0.08			0.00			0.01
Net loss on lease termination, impairment and unoccupied lease charges		0.02			0.03			0.06			0.11
Net loss on lease termination and unoccupied lease charges														0.02			0.01
Change in contingent consideration		(0.11	)		0.00			(0.19	)		0.00			0.00			(0.04	)
Income tax expense related to goodwill		0.00			0.00			0.00			0.01			0.00			0.00
Non-GAAP adjusted earnings per share	$	0.21		$	0.41		$	0.81		$	0.91		$	0.15		$	0.23

End-of-period common shares		15,211,136			14,873,411			15,211,136			14,873,411			15,592,608			15,062,651
In-the-money warrants and outstanding unvested RSUs		605,526			2,432,636			605,526			2,432,636			630,094			790,926
Total fully diluted shares		15,816,662			17,306,047			15,816,662			17,306,047			16,222,702			15,853,577
Non-GAAP adjusted diluted earnings per share	$	0.21		$	0.35		$	0.78		$	0.78		$	0.15		$	0.22

For purposes of determining non-GAAP adjusted earnings per share, the Company used the number of common shares outstanding at the end of ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. Non-GAAP adjusted diluted earnings per share was computed using an as-converted method and includes warrants that are in-the-money as of that date as well as outstanding unvested RSUs. Non-GAAP adjusted earnings per share and non-GAAP adjusted diluted earnings per share do not take into account dividends paid on ~~Preferred Stock.~~preferred stock. No tax effect has been provided in computing non-GAAP adjusted earnings per share and non-GAAP adjusted diluted earnings per share as the Company has sufficient carry forward net operating losses to offset the applicable income taxes.

In addition to the line items in our consolidated financial statements, we regularly review the following metrics. We believe information on these metrics is useful for investors to understand the underlying trends in our business.

Providers and Practices Served: As of both ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ we provided services to an estimated universe of approximately 40,000 providers (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services), representing approximately 2,600 independent medical practices and hospitals. In addition, we served approximately ~~200~~150 clients who were not medical practices, but are service organizations who serve the healthcare community. The foregoing numbers include clients leveraging any of our products or services and are based in part upon estimates in cases where the precise number of practices or providers is unknown.

Revenue: We primarily derive our revenues from subscription-based technology-enabled business solutions, reported in our Healthcare IT segment, which are typically billed as a percentage of payments collected by our customers. This fee includes technology-enabled RCM, as well as the ability to use our EHR, practice management system and other software as part of the bundled fee. These solutions accounted for approximately ~~64%~~65% and ~~71% of our revenues during~~66% for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and 64% and 78% for the nine months ended September 30, 2022 and 2021,~~ respectively. Other healthcare IT services, including printing and mailing operations, group purchasing and professional services, represented ~~approximately~~ 25% ~~and 20%~~for each of ~~revenues for~~ the three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021, respectively, and 26% and 13% for the nine months ended September 30, 2022 and 2021, respectively.~~2022.

We earned approximately ~~11%~~10% and 9% of our revenue from medical practice management services during the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively, and 10% and 9% for the nine months ended September 30, 2022 and 2021,~~ respectively. This revenue represents fees based on our actual costs plus a percentage of the operating profit and is reported in our Medical Practice Management segment.

Direct Operating Costs. Direct operating cost consists primarily of salaries and benefits related to personnel who provide services to our customers, claims processing costs, costs to operate the three managed practices, including facility lease costs, supplies, insurance and other direct costs related to our services. Costs associated with the implementation of new customers are expensed as incurred. The reported amounts of direct operating costs do not include depreciation and amortization, which are broken out separately in the consolidated statements of operations.

Selling and Marketing Expense. Selling and marketing expense consists primarily of compensation and benefits, commissions, travel and advertising expenses.

General and Administrative Expense. General and administrative expense consists primarily of personnel-related expense for administrative employees, including compensation, benefits, travel, facility lease costs and insurance, software license fees and outside professional fees.

Research and Development Expense. Research and development expense consists primarily of personnel-related costs, software expense and third-party contractor costs.

Change in Contingent Consideration. Contingent consideration represents the portion of consideration payable to the sellers of some of our acquisitions, the amount of which is based on the achievement of defined performance measures contained in the purchase agreements. Contingent consideration is adjusted to fair value at the end of each reporting period.

Depreciation and Amortization Expense. Depreciation expense is charged using the straight-line method over the estimated lives of the assets ranging from three to five years. Amortization expense is charged on either an accelerated or on a straight-line basis over a period of three or four years for most intangible assets acquired in connection with acquisitions including those intangibles related to the group purchasing services. Amortization expense related to the value of our medical practice management clients is amortized on a straight-line basis over a period of twelve years.

Net Loss on Lease Termination ~~Impairment~~ and Unoccupied Lease Charges. Net loss on lease termination represents the write-off of leasehold improvements and gains or losses as the result of lease terminations. ~~Impairment charges represent charges recorded for a leased facility no longer being used by the Company and a non-cancellable vendor contract where the services are no longer being used.~~ Unoccupied lease charges represent the portion of the lease and related costs for that portion of the space that is vacant ~~space~~and not being utilized by the Company. One of the leases that had unoccupied space ended in February 2023. The Company was able to turn back to the landlord one of the other unused facilities effective January 1, 2022.

Interest and Other Income (Expense). Interest expense consists primarily of interest costs related to our line of credit, term loans and amounts due in connection with acquisitions, offset by interest income. Other income (expense) results primarily from foreign currency transaction ~~gains~~ gains/(losses) and income earned from temporary cash investments.

Income ~~Tax.~~Taxes. In preparing our consolidated financial statements, we estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred income tax assets and liabilities. Although the Company is forecasting a return to profitability, it incurred losses historically and there is uncertainty regarding future U.S. taxable income, which makes realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all deferred tax assets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

The critical accounting policies and estimates used in the preparation of our consolidated financial statements that we believe affect our more significant judgments and estimates used in the preparation of our consolidated financial statements presented in this Report are described in Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the Notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liability (current portion) and operating lease liability (noncurrent portion) in the consolidated balance sheets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022. The Company does not have any finance leases.

We use our estimated incremental borrowing rates, which are derived from information available at the lease commencement date, in determining the present value of lease payments. We give consideration to bank financing arrangements, geographical location and collateralization of assets when calculating our incremental borrowing rates.

Our lease term includes options to extend the lease when it is reasonably certain that we will exercise that option. Leases with a term of less than 12 months are not recorded in the consolidated balance sheet. Our lease agreements do not contain any residual value guarantees. For real estate leases, we account for the ~~leased~~lease and ~~non-leased~~non-lease components as a single lease component. Some leases include escalation clauses and termination options that are factored into the determination of the future lease payments when appropriate.

All of our software is considered internal use for accounting purposes, as we do not market or sell our software. As a result, we capitalize certain costs associated with the creation of internally-developed software for internal use. The total of these costs is recorded in Intangible assets – net in our consolidated balance sheets.

We capitalized costs incurred during the application development stage related to our internal use software. Costs incurred during the application development phase are capitalized only when we believe it is probable that the development will result in new or additional functionality. The types of costs capitalized during the application development phase consist of employee compensation, employee benefits and employee stock-based compensation. Costs related to the preliminary project stage and post-implementation activities are expensed as incurred. Capitalized internal-use software is amortized on a straight-line basis over its estimated useful life when the asset has been placed in service for general availability.

Significant judgments related to internally-developed software include determining whether it is probable that projects will result in new or additional functionality; concluding on when the application development phase starts and ends; and deciding which costs, especially employee compensation costs, should be capitalized. Additionally, there is judgment applied to the useful lives of capitalized software; we have concluded that the useful lives for capitalized internally-developed software is three years.

Company management employs its best estimates and assumptions in determining the appropriateness of the judgments noted above on a project-by-project basis during initial capitalization as well as subsequent measurement. While we believe that our approach to estimates and judgments is reasonable, actual results could differ, and such differences could lead to an increase or decrease in expense.

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the carrying amounts of internally-developed capitalized software in use was ~~$15.5~~$17.0 million and ~~$11.6~~$16.6 million, respectively. The increase in the capitalized software costs represents the continued investment in proprietary technology.

There have been no material changes in our critical accounting policies and estimates from those described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, filed with the SEC on March ~~14, 2022.~~2, 2023.

The following table sets forth our consolidated results of operations as a percentage of total revenue for the periods shown:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
Net revenue		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Operating expenses:
Direct operating costs		60.5	%		63.0	%		61.0	%		61.4	%		60.3	%		64.2	%
Selling and marketing		7.4	%		6.2	%		6.9	%		6.3	%		8.7	%		6.7	%
General and administrative		19.3	%		15.5	%		17.4	%		17.4	%		17.1	%		15.8	%
Research and development		3.5	%		1.3	%		3.1	%		4.2	%		3.6	%		2.8	%
Change in contingent consideration		(4.9	)%		0.0	%		(2.7	)%		0.0	%		0.0	%		(1.7	%)
Depreciation and amortization		8.3	%		9.3	%		8.2	%		9.3	%		10.1	%		8.3	%
Net loss on lease termination, impairment and unoccupied lease charges		0.9	%		1.1	%		0.9	%		1.6	%
Net loss on lease termination and unoccupied lease charges														0.9	%		0.4	%
Total operating expenses		95.0	%		96.4	%		94.8	%		100.2	%		100.7	%		96.5	%

Operating income (loss)		5.0	%		3.6	%		5.2	%		(0.2	)%
Operating (loss) income														(0.7	%)		3.5	%

Interest expense - net		0.2	%		0.2	%		0.3	%		0.3	%		0.4	%		0.3	%
Other expense - net		(1.5	)%		(0.2	)%		(0.3	)%		(0.1	)%
Income (loss) before provision (benefit) for income taxes		3.3	%		3.2	%		4.6	%		(0.6	)%
Income tax provision (benefit)		0.2	%		(0.6	)%		0.1	%		(0.0	)%
Net income (loss)		3.1	%		3.8	%		4.5	%		(0.6	)%
Other income - net														0.0	%		0.2	%
(Loss) income before provision for income taxes														(1.1	%)		3.4	%
Income tax provision														0.2	%		0.2	%
Net (loss) income														(1.3	%)		3.2	%

Comparison of the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

Net Revenue. Net revenue of ~~$33.7 million and $106.3~~$30.0 million for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 decreased by ~~$4.6~~$5.3 million or ~~12% and increased by $4.2 million or 4%~~15% from net revenue of ~~$38.3~~$35.3 million ~~and~~ ~~$102.1 million~~ for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022. Revenue for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 includes ~~approximately $6.4~~$19.5 million relating to technology-enabled business solutions, $6.6 million related to professional services and ~~$22.2~~$3.0 million ~~from customers acquired in the medSR acquisition, offset primarily~~for medical practice management services. Revenue was negatively impacted by ~~a decrease in revenue from three~~two large accounts from a 2020 acquisition that ~~are~~were winding ~~down.~~down at the time of the acquisition and which transitioned to the systems of their acquirers during 2022. Revenue from these customers for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~includes $21.6~~was $1.0 million and ~~$68.5~~$3.6 million, ~~relating~~respectively, and is expected to ~~technology-enabled business solutions, $7.4~~ ~~million~~ ~~and $25.6~~ ~~million~~ ~~related to professional services and $3.8 million and $10.1~~be approximately $1.0 million for ~~medical practice management services.~~the remainder of 2023. Excluding these customers, revenue for the three months ended March 31, 2023 would have been $29.0 million, a decrease of 8.8% from $31.8 million in the three months ended March 31, 2022. (Refer to Forward-Looking Statements disclosure on page 2 of this Form 10-Q.)

Direct Operating Costs. Direct operating costs of ~~$20.4~~$18.1 million ~~and~~ ~~$64.9 million~~ for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 decreased by ~~$3.7~~$4.6 million or ~~15%~~ ~~and increased by $2.1~~ ~~million~~ or 3% 20% compared to direct operating costs of ~~$24.1~~$22.7 million ~~and~~ ~~$62.7 million~~ for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022. During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, salary costs decreased by ~~$3.3~~$2.9 million~~and~~ ~~$894,000~~, and outsourcing and processing costs decreased by ~~$456,000 and increased by $2.9~~ ~~million, respectively.~~$1.7 million. The decrease in the salary costs was due to the decrease in the Pakistan exchange rate, a decrease in the USU.S. headcount and the redeployment of employees performing functions that were classified as direct operating costs due to lower revenue as well as functions classified as research and development expense for the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023.

Selling and Marketing Expense. Selling and marketing expense of ~~$2.5 million and $7.3~~$2.6 million for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 increased by ~~$129,000~~$228,000 or ~~5% and $845,000 or 13%~~10% from selling and marketing expense of $2.4 million ~~and $6.5 million~~ for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. The increase was primarily related to additional emphasis on sales and marketing activities.

General and Administrative Expense. General and administrative expense of ~~$6.5 million and $18.5~~$5.1 million for the three ~~and nine~~ months ended ~~September 30, 2022 increased~~March 31, 2023 decreased by ~~$579,000~~ $465,000 or ~~10% and~~ ~~$665,000~~ ~~or 4%~~8% compared to general and administrative expense of ~~$5.9 million and $17.8~~$5.6 million for the three ~~and nine~~ months ended ~~September 30, 2021.~~ March 31, 2022. The ~~increase is~~decrease was primarily due to the ~~Company’s contributions to community based projects and to a new academic institution~~decrease in ~~the Bagh area, a community where the Company has a large employee base.~~salary costs of $519,000.

Research and Development Expense. Research and development expense of ~~$1.2 million and $3.3~~$1.1 million for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 increased by approximately ~~$680,000 and decreased by $1.1 million~~$93,000 from research and development expense of ~~$488,000 and $4.3 million~~$985,000 for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. The ~~decrease represents less maintenance work on platforms generating revenue and more resources dedicated to development of new technology which is not yet in commercial use and the~~ increase iswas due to the redeployment of employees performing functions that were classified as direct operating costs to functions classified as research and development expense. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company capitalized approximately ~~$7.0~~$2.2 million and ~~$5.3~~$2.3 million, respectively, of development costs in connection with its internal-use software. ~~For the three months ended September 30, 2022 and 2021, the Company capitalized approximately $2.3 million and $2.0 million, respectively, of such costs.~~

Change in Contingent Consideration. There was no change in contingent consideration during the quarter ended March 31, 2023 as the balance of contingent consideration was $0 at December 31, 2022. The change of ~~$1.7 million and $2.9 million~~$600,000 for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 reflects the estimated decrease in the fair value of the contingent consideration from the medSR acquisition.

Depreciation. Depreciation of ~~$474,000~~ ~~and~~ ~~$1.4 million~~ $492,000 for the three ~~and nine~~ months ended ~~September 30, 2022, respectively, decreased~~March 31, 2023, increased by ~~$14,000~~ $43,000 or 3% ~~and~~ ~~$77,000~~ or 5% 10% from the depreciation of ~~$488,000 and $1.5 million~~$449,000 for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022.

Amortization Expense. Amortization expense of ~~$2.3 million and $7.3~~$2.5 million for the three ~~and nine~~ months ended ~~September 30, 2022, respectively, decreased~~March 31, 2023, increased by ~~$723,000~~$55,000 or ~~24% and $742,000 or 9%~~2% from amortization expense of ~~$3.1 million and $8.0~~$2.5 million for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022. The ~~decrease~~increase in amortization expense was due to ~~intangibles which were previously capitalized becoming fully amortized.~~the capitalization of intangibles.

Net Loss on Lease Termination ~~Impairment~~ and Unoccupied Lease Charges. Net loss on lease termination represents the write-off of leasehold improvements and gains or losses as the result of lease terminations. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023, the Miami office lease that we assumed in connection with an acquisition ended and we entered into a new lease arrangement with the landlord for significantly less space. Charges of approximately $71,000 were incurred as a result of vacating the former premises. During the year ended December 31, 2022, a facility lease was terminated in conjunction with the Company ceasing its document storage services resulting in additional costs for the three months ended March 31, 2023, of approximately ~~$248,000. Impairment charges represent charges recorded for a leased facility no longer being used by the Company and a non-cancellable vendor contract where the services are no longer being used.~~$45,000. Unoccupied lease charges represent the portion of the lease and related costs for that portion of the space that is vacant and not being utilized by the Company. The Company was able to turn back to the landlord one of the unused facilities effective January 1, 2022.

	Three Months Ended September 30,						Change						Nine Months Ended September 30,						Change						Three Months Ended March 31,						Change
	2022			2021			Amount			Percent			2022			2021			Amount			Percent			2023			2022			Amount			Percent
	($ in thousands)																								($ in thousands)
Interest income	$	14		$	4		$	10			250	%	$	22		$	10		$	12			120	%	$	20		$	5		$	15			300	%
Interest expense		(96	)		(91	)		(5	)		(5	%)		(303	)		(274	)		(29	)		(11	%)		(150	)		(100	)		(50	)		(50	%)
Other expense - net		(495	)		(65	)		(430	)		(662	%)		(300	)		(80	)		(220	)		(275	%)
Income tax provision (benefit)		55			(232	)		(287	)		(124	%)		144			(20	)		(164	)		(820	%)
Other income - net																										17			83			(66	)		(80	%)
Income tax provision																										65			64			(1	)		(2	%)

Interest Income. Interest income of ~~$14,000~~ ~~and~~ ~~$22,000~~ $20,000 for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 increased by ~~$10,000~~ or ~~250%~~ ~~and~~ ~~$12,000~~ or ~~120%~~ $15,000 from interest income of ~~$4,000 and $10,000~~$5,000 for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. The interest income represents interest earned on temporary cash ~~investments.~~investments and late fees from customers.

Interest Expense. Interest expense of ~~$96,000 and $303,000~~$150,000 for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 increased by ~~$5,000~~$50,000 or ~~5% and $29,000 or 11%~~50% from interest expense of ~~$91,000 and $274,000~~$100,000 for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. Interest expense includes the amortization of deferred financing costs, which was ~~$92,000~~$48,000 and ~~$107,000~~$30,000 during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

Other ~~Expense~~Income – net. Other ~~expense~~income – net was ~~$495,000 and $300,000~~$17,000 for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 compared to other ~~expense~~income – net of ~~$65,000 and $80,000~~$83,000 for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2022. Other income or expense primarily represents foreign currency transaction gains ~~and~~or losses. These transaction gains ~~and~~or losses result from revaluing intercompany accounts ~~whenever~~which are denominated in U.S. dollars that represent amounts receivable/payable between the entities. Whenever the exchange rate varies, ~~and~~the gains or losses are recorded in the consolidated statements of operations.

Income Tax ~~Provision (Benefit).~~Provision. The provision for income taxes was ~~$55,000~~ ~~and~~ ~~$144,000~~ $65,000 for the three ~~and nine~~ months ended ~~September 30, 2022, respectively,~~March 31, 2023, compared to the ~~benefit~~provision for income taxes of ~~$232,000 and $20,000~~$64,000 for the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022. As a result of the Company having certain net operating losses with an indefinite life under the current federal tax rules, the federal deferred tax liability was offset against the federal net operating loss to the extent allowable in ~~2022~~2023 and ~~2021.~~2022. During ~~the quarter ended June 30,~~ 2022, it was determined that for the states that follow the federal rules regarding indefinite life net operating losses, the offset to the state deferred tax liability was $45,000. This amount was recorded during the second quarter of 2022. Subsequently, the state deferred tax liability has been offset against state net operating losses to the extent allowable.

The current income tax expense for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 was approximately ~~$20,000 and $82,000, respectively,~~$39,000, and includes state minimum taxes and foreign income taxes. The Company has incurred cumulative losses historically and there is uncertainty regarding future U.S. taxable income, which makes realization of a deferred tax losses difficult to support in accordance with ASC 740. Accordingly, a valuation allowance was recorded against all deferred tax assets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

During the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, there was positive cash flow from operations of ~~$7.0 million and $15.1~~$1.0 million and at ~~September 30, 2022,~~March 31, 2023, the Company had ~~$4.9~~$8.2 million in ~~cash and restricted~~ cash and positive working capital of ~~$5.1~~$12.3 million. The Company has a revolving line of credit, ~~with SVB,~~ and as of ~~September 30, 2022,~~March 31, 2023, there was ~~no balance~~$10 million outstanding. As of March 31, 2023, the unused borrowing base was approximately $5.5 million. During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company sold ~~1,299,216~~ 59,773 shares of 8.75% Series B Preferred Stock and raised ~~$30.3~~$1.4 million in net proceeds after fees and expenses.

~~Income~~The loss before income taxes was ~~$1.1 million~~ ~~and~~ ~~$5.1 million~~ $336,000 for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, which included ~~$2.8~~$3.0 million ~~and~~ ~~$8.7 million~~ of non-cash depreciation and ~~amortization, respectively.~~amortization. The income before income taxes was ~~$1.3~~$1.2 million for the three months ended ~~September 30, 2021, and the loss before income taxes was $706,000 for the nine months ended September 30, 2021,~~March 31, 2022, which included ~~$3.5 million and $9.5~~$2.9 million of non-cash depreciation and ~~amortization, respectively.~~amortization.

Net cash provided by operating activities was ~~$15.1~~$1.0 million and ~~$7.2~~ $3.1 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. This ~~increase~~decrease was primarily the result of the ~~increase~~decrease in net income of ~~$5.6~~$1.5 million which included the following changes in non-cash items: ~~decrease~~an increase in depreciation and amortization of ~~$733,000~~, ~~decrease in stock-based compensation~~ ~~of $607,000~~,$125,000 and an increase in ~~the change in contingent consideration~~ stock-based compensation of ~~$2.9~~ ~~million~~.$185,000.

Accounts receivable ~~decreased~~increased by ~~$10,000~~$156,000 for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared with an increase of ~~$1.4~~$1.6 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. Accounts payable, accrued compensation and accrued expenses decreased by ~~$4.3~~ $2.6 million during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 compared with a decrease o~~f $7.0~~of $1.1 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The contract asset and other assets increased by $699,000 and $518,000, respectively, during the quarter ended March 31, 2023.

Net cash used in investing activities was ~~$9.1~~$3.0 million and ~~$19.9~~$2.8 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. ~~In 2021, $12.6 million of the $19.9 million of cash used was used for the acquisition of medSR.~~ Capital expenditures were ~~$2.2 million~~ $835,000 and ~~$2.0 million~~$544,000 for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively. The capital expenditures for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ primarily represented computer equipment purchased and leasehold improvements for the Pakistan Offices. Software development costs of ~~$7.0~~$2.2 million and ~~$5.3~~$2.3 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, were capitalized in connection with the development of software for providing technology-enabled business solutions.

Net cash used in financing activities was ~~$11.1~~$1.8 million and $342,000 during the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, and net cash provided by financing activities was $1.3 million during the nine months ended September 30, 2021. The Company received net proceeds from the sale of Series B Preferred Stock of $30.3 million of which $20.0 million was used to redeem 800,000 shares of Series A Preferred Stock.respectively. Cash used in financing activities during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 included ~~$11.5~~$3.9 million of preferred stock dividends, ~~$769,000~~$236,000 of repayments for debt obligations and $1.1 million of tax withholding obligations paid in connection with stock awards issued to employees. Cash used in financing activities ~~for~~during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 included ~~$10.8~~$3.9 million of preferred stock dividends, ~~$745,000~~$251,000 of ~~repayment~~repayments for debt obligations and ~~$2.1 million~~$775,000 of tax withholding obligations paid in connection with stock awards issued to employees. During the three months ended March 31, 2022, the Company received net proceeds from the sale of Series B Preferred Stock of $26.6 million of which $20.0 million was used to redeem 800,000 shares of Series A Preferred Stock.

We have contractual obligations under our line of ~~credit~~.credit. We were in compliance with all ~~SVB~~ covenants as of ~~September 30, 2022.~~March 31, 2023. We also maintain operating leases for property and certain office equipment. For additional information, see Contractual Obligations and Commitments under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021,~~2022, filed with the SEC on March ~~14, 2022.~~2, 2023.

As of ~~September 30,~~March 31, 2023, and 2022, ~~and 2021,~~ we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special-purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. During the first quarter of 2020, a New Jersey corporation, talkMD Clinicians, PA (“talkMD”), was formed by the wife of the Executive Chairman, who is a licensed physician, to provide telehealth services. talkMD was determined to be a variable interest entity (“VIE”) for financial reporting purposes because the entity will be controlled by the Company. As of ~~September 30, 2022,~~March 31, 2023, talkMD had not yet commenced operations.

We are a smaller reporting company as defined by 17 C.F.R. 229.10(f)(1) and are not required to provide information under this item, pursuant to Item 305(e) of Regulation S-K.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, based on the ~~2013 framework and criteria established~~Internal Control-Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), evaluated the effectiveness of our disclosure controls and procedures as of ~~September 30, 2022~~March 31, 2023 as required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures, as of ~~September 30, 2022,~~March 31, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and l5d-15(f) of the Exchange Act) that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

See discussion of legal proceedings in “Note 8,7, Commitments And Contingencies” of the Notes to Consolidated Financial Statements in this Quarterly Report, which is incorporated by reference herein.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I—Item 1A. “Risk Factors” in our Annual Report on Form 10-K, filed with the SEC on March ~~14, 2022,~~2, 2023, which could materially affect our business, financial condition and/or future ~~results and may be further impacted by the coronavirus pandemic.~~results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, cash flows and/or future results.

We Maintain Our Cash at Financial Institutions, Often in Balances That Exceed Federally Insured Limits.

The financial markets recently have encountered volatility associated with concerns about the balance sheets of banks, especially small and regional banks who may have significant losses associated with investments that make it difficult to fund demands to withdraw deposits and other liquidity needs. Although the federal government has announced measures to assist these banks and protect depositors, some banks have already been impacted and others may be materially and adversely impacted. Our business is dependent on bank relationships and we are proactively monitoring the financial health of such bank relationships. Continued strain on the banking system may adversely impact our business, financial condition and results of operations.

*The*The certifications on Exhibit 32 hereto are not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Delaware		22-3832302
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

7 Clyde Road Somerset, New Jersey		08873
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	~~MTBC~~CCLD	Nasdaq Global Market
11% Series A Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per share	~~MTBCP~~CCLDP	Nasdaq Global Market
8.75% Series B Cumulative Redeemable Perpetual Preferred Stock, par value $0.001 per share	~~MTBCO~~CCLDO	Nasdaq Global Market

Large accelerated filer ☐	Accelerated filer ☐
~~Accelerated~~Non-accelerated filer ☒
~~Non-accelerated filer~~ ☐	Smaller reporting company ☒
		Emerging growth company ☐

			Page
Forward-Looking Statements		2

PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)
	Consolidated Balance Sheets at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	3
	Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	4
	Consolidated Statements of Comprehensive (Loss) Income ~~(Loss)~~ for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	5
	Consolidated Statements of Shareholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	6
	Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2624
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3835
Item 4.	Controls and Procedures	3835

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3936
Item 1A.	Risk Factors	3936
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3936
Item 3.	Defaults Upon Senior Securities	3936
Item 4.	Mine Safety Disclosures	3936
Item 5.	Other Information	3936
Item 6.	Exhibits	3936
Signatures		4037

	●	our ability to manage our growth, including acquiring, partnering with, and effectively integrating 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 our offshore offices 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, upgrade 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 A. Hadi Chaudhry as Chief Executive Officer and President, all of which 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, a division of First-Citizens Bank & Trust Company, and other future debt facilities;

	●	our ability to pay our monthly preferred dividends to the holders of our Series A and Series B preferred stock;

	●	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 ongoing COVID-19 pandemic and the impact it may have on our operations, the demand for our services, our projected results of operations, financial performance or other financial metrics or any of the foregoing risks and economic activity in general;

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

	●	changes in domestic and foreign business, market, financial, political and legal conditions; and

	●	other factors disclosed in this Quarterly Report on Form 10-Q or our other filings with the ~~SEC.~~Securities and Exchange Commission (the “SEC”).

	Shares			Amount			Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Stock			Equity
	Preferred Stock Series A						Preferred Stock Series B				Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Treasury (Common)			Total Shareholders’
	Shares			Amount			Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Stock			Equity
Balance - January 1, 2022		5,299,227		$	5			-	$	-		15,657,641	$	16	$	131,379		$	(31,053	)	$	(1,754	)	$	(662	)	$	97,931
Net income		-			-			-		-		-		-		-			1,140			-			-			1,140
Foreign currency translation adjustment		-			-			-		-		-		-		-			-			(255	)		-			(255	)
Issuance of stock under the equity incentive plan		22,319			-			-		-		145,809		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-			-		-		-		-		887			-			-			-			887
Redemption of Series A Preferred Stock		(800,000	)		-			-		-		-		-		(20,000	)		-			-			-			(20,000	)
Issuance of Series B Preferred Stock		-			-			1,150,372		1		-		-		26,637			-			-			-			26,638
Stock issuance costs		-			-			-		-		-		-		(11	)		-			-			-			(11	)
Preferred stock dividends		-			-			-		-		-		-		(4,037	)		-			-			-			(4,037	)
Balance - March 31, 2022		4,521,546		$	5			1,150,372	$	1		15,803,450	$	16	$	134,855		$	(29,913	)	$	(2,009	)	$	(662	)	$	102,293

Balance - April 1, 2022		4,521,546		$	5			1,150,372	$	1		15,803,450	$	16	$	134,855		$	(29,913	)	$	(2,009	)	$	(662	)	$	102,293
Net income		-			-			-		-		-		-		-			2,737			-			-			2,737
Foreign currency translation adjustment		-			-			-		-		-		-		-			-			(990	)		-			(990	)
Issuance of stock under the equity incentive plan		4,685			-			10,000		-		15,809		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-			-		-		-		-		1,257			-			-			-			1,257
Redemption of Series A Preferred Stock		-			-			-		-		-		-		(5	)		-			-			-			(5	)
Issuance of Series B Preferred Stock		-			-			49,876		-		-		-		1,223			-			-			-			1,223
Stock issuance costs		-			-			-		-		-		-		(10	)		-			-			-			(10	)
Preferred stock dividends		-			-			-		-		-		-		(3,776	)		-			-			-			(3,776	)
Balance - June 30, 2022		4,526,231		$	5			1,210,248	$	1		15,819,259	$	16	$	133,544		$	(27,176	)	$	(2,999	)	$	(662	)	$	102,729

Balance - July 1, 2022		4,526,231		$	5			1,210,248	$	1		15,819,259	$	16	$	133,544		$	(27,176	)	$	(2,999	)	$	(662	)	$	102,729
Net income		-			-			-		-		-		-		-			1,056			-			-			1,056
Foreign currency translation adjustment		-			-			-		-		-		-		-			-			(537	)		-			(537	)
Issuance of stock under the equity incentive plan		-			-			-		-		132,676		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-			-		-		-		-		1,017			-			-			-			1,017
Issuance of Series B Preferred Stock		-			-			98,968		-		-		-		2,419			-			-			-			2,419
Stock issuance costs		-			-			-		-		-		-		(11	)		-			-			-			(11	)
Preferred stock dividends		-			-			-		-		-		-		(3,849	)		-			-			-			(3,849	)
Balance - September 30, 2022		4,526,231		$	5			1,309,216	$	1		15,951,935	$	16	$	133,120		$	(26,120	)	$	(3,536	)	$	(662	)	$	102,824

Balance - January 1, 2021		5,475,279		$	5			-	$	-		14,121,044	$	14	$	136,781		$	(33,889	)	$	(1,004	)	$	(662	)	$	101,245
Net loss		-			-			-		-		-		-		-			(1,964	)		-			-			(1,964	)
Foreign currency translation adjustment		-			-			-		-		-		-		-			-			345			-			345
Issuance of stock under the equity incentive plan		27,682			1			-		-		161,545		-		(1	)		-			-			-			-
Stock-based compensation, net of cash settlements		-			-			-		-		-		-		623			-			-			-			623
Stock issuance costs		-			-			-		-		-		-		(43	)		-			-			-			(43	)
Exercise of common stock warrants		-			-			-		-		858,000		1		6,434			-			-			-			6,435
Preferred stock dividends		-			-			-		-		-		-		(3,128	)		-			-			-			(3,128	)
Balance - March 31, 2021		5,502,961		$	6			-	$	-		15,140,589	$	15	$	140,666		$	(35,853	)	$	(659	)	$	(662	)	$	103,513

Balance - April 1, 2021		5,502,961		$	6			-	$	-		15,140,589	$	15	$	140,666		$	(35,853	)	$	(659	)	$	(662	)	$	103,513
Net loss		-			-			-		-		-		-		-			(227	)		-			-			(227	)
Foreign currency translation adjustment		-			-			-		-		-		-		-			-			(405	)		-			(405	)
Issuance of stock under the Amended and Restated Equity Incentive Plan		4,244			-			-		-		33,724		-		-			-			-			-			-
Issuance of common stock, net of fees and expenses		-			-			-		-		178,092		-		1,360			-			-			-			1,360
Stock-based compensation, net of cash settlements		-			-			-		-		-		-		1,163			-			-			-			1,163
Cancellation of shares held in escrow		(215,822	)		(1	)		-		-		-		-		(4,000	)		-			-			-			(4,001	)
Preferred stock dividends		-			-			-		-		-		-		(3,638	)		-			-			-			(3,638	)
Balance - June 30, 2021		5,291,383		$	5			-	$	-		15,352,405	$	15	$	135,551		$	(36,080	)	$	(1,064	)	$	(662	)	$	97,765

Balance - July 1, 2021		5,291,383		$	5			-	$	-		15,352,405	$	15	$	135,551		$	(36,080	)	$	(1,064	)	$	(662	)	$	97,765
Balance		5,291,383		$	5			-	$	-		15,352,405	$	15	$	135,551		$	(36,080	)	$	(1,064	)	$	(662	)	$	97,765
Net income		-			-			-		-		-		-		-			1,505			-			-			1,505
Net income (loss)		-			-			-		-		-		-		-			1,505			-			-			1,505
Foreign currency translation adjustment		-			-			-		-		-		-		-			-			(475	)		-			(475	)
Issuance of stock under the Amended and Restated Equity Incentive Plan		4,031			-			-		-		125,410		-		-			-			-			-			-
Issuance of common stock, net of fees and expenses		-			-			-		-		136,395		1		1,168			-			-			-			1,169
Stock-based compensation, net of cash settlements		-			-			-		-		-		-		729			-			-			-			729
Preferred stock dividends		-			-			-		-		-		-		(3,642	)		-			-			-			(3,642	)
Balance - September 30, 2021		5,295,414		$	5			-	$	-		15,614,210	$	16	$	133,806		$	(34,575	)	$	(1,539	)	$	(662	)	$	97,051
Balance		5,295,414		$	5			-	$	-		15,614,210	$	16	$	133,806		$	(34,575	)	$	(1,539	)	$	(662	)	$	97,051


	Preferred Stock Series A					Preferred Stock Series B				Common Stock				Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Treasury (Common)			Total Shareholders’
	Shares			Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Loss			Stock			Equity
Balance - January 1, 2023 before adoption of ASC 326		4,526,231		$	5		1,344,128	$	1		15,970,204	$	16	$	130,987		$	(25,621	)	$	(3,037	)	$	(662	)	$	101,689
Cumulative effect of adopting ASC 326		-			-		-		-		-		-		-			(186	)		-			-			(186	)
Balance - January 1, 2023 after adoption		4,526,231			5		1,344,128		1		15,970,204		16		130,987			(25,807	)		(3,037	)		(662	)		101,503
Net loss		-			-		-		-		-		-		-			(401	)		-			-			(401	)
Foreign currency translation adjustment		-			-		-		-		-		-		-			-			(1,711	)		-			(1,711	)
Issuance of stock under the equity incentive plan		-			-		41,491		-		343,203		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-		-		-		-		-		1,185			-			-			-			1,185
Shares issued for services		-			-		-		-		20,000		-		-			-			-			-			-
Issuance of Series B Preferred Stock		-			-		59,773		-		-		-		1,437			-			-			-			1,437
Preferred stock dividends		-			-		-		-		-		-		(3,931	)		-			-			-			(3,931	)
Balance - March 31, 2023		4,526,231		$	5		1,445,392	$	1		16,333,407	$	16	$	129,678		$	(26,208	)	$	(4,748	)	$	(662	)	$	98,082

Balance - January 1, 2022		5,299,227		$	5		-	$	-		15,657,641	$	16	$	131,379		$	(31,053	)	$	(1,754	)	$	(662	)	$	97,931
Balance		5,299,227		$	5		-	$	-		15,657,641	$	16	$	131,379		$	(31,053	)	$	(1,754	)	$	(662	)	$	97,931
Net income		-			-		-		-		-		-		-			1,140			-			-			1,140
Net income (loss)		-			-		-		-		-		-		-			1,140			-			-			1,140
Foreign currency translation adjustment		-			-		-		-		-		-		-			-			(255	)		-			(255	)
Issuance of stock under the equity incentive plan		22,319			-		-		-		145,809		-		-			-			-			-			-
Stock-based compensation, net of cash settlements		-			-		-		-		-		-		887			-			-			-			887
Redemption of Series A Preferred Stock		(800,000	)		-		-		-		-		-		(20,000	)		-			-			-			(20,000	)
Issuance of Series B Preferred Stock		-			-		1,150,372		1		-		-		26,637			-			-			-			26,638
Stock issuance costs		-			-		-		-		-		-		(11	)		-			-			-			(11	)
Preferred stock dividends		-			-		-		-		-		-		(4,037	)		-			-			-			(4,037	)
Balance - March 31, 2022		4,521,546		$	5		1,150,372	$	1		15,803,450	$	16	$	134,855		$	(29,913	)	$	(2,009	)	$	(662	)	$	102,293
Balance		4,521,546		$	5		1,150,372	$	1		15,803,450	$	16	$	134,855		$	(29,913	)	$	(2,009	)	$	(662	)	$	102,293

medSR Purchase Price
		($ in thousands)
Cash	$	12,261
Amounts held in escrow		1,571
Contingent consideration		5,605
Total purchase price	$	19,437

	($ in thousands)
Accounts receivable	$	2,696
Receivable from seller		227
Prepaid expenses		102
Unbilled receivables		2,491
Property and equipment		84
Customer relationships		3,100
Acquired backlog		490
Goodwill		11,931
Accounts payable		(539	)
Accrued expenses & compensation		(1,125	)
Deferred revenue		(20	)
Total purchase price allocation	$	19,437


	Three Months Ended		Year Ended
	March 31, 2023		December 31, 2022
	($ in thousands)
Beginning gross balance	$	61,186	$	61,186
Acquisitions		-		-
Ending gross balance	$	61,186	$	61,186

Operating leases - Years ending December 31,	($ in thousands)
2022 (three months)	$	1,072
2023		2,187
2024		1,003
2025		525
2026		237
Thereafter		1,756
Total lease payments		6,780
Less: imputed interest		(1,319	)
Total lease obligations		5,461
Less: current obligations		(2,554	)
Long-term lease obligations	$	2,907

	Accounts Receivable, Net			Contract Asset			Deferred Revenue (current)			Deferred Revenue (long term)
	($ in thousands)
Balance as of January 1, 2022	$	17,006		$	4,725		$	1,085		$	341
(Decrease) increase, net		(725	)		(318	)		332			49
Balance as of September 30, 2022	$	16,281		$	4,407		$	1,417		$	390

Balance as of January 1, 2021	$	12,089		$	4,105		$	1,173		$	305
medSR acquisition		2,705			2,402			20			-
Increase (decrease), net		3,300			(1,846	)		(104	)		(89	)
Balance as of September 30, 2021	$	18,094		$	4,661		$	1,089		$	216

	Common Stock			Series A Preferred Stock			Series B Preferred Stock
Outstanding and unvested shares at January 1, 2022		418,039			34,000			-
Granted		625,252			-			80,000
Vested		(426,299	)		(34,000	)		(10,000	)
Forfeited		(55,616	)		-			-
Outstanding and unvested shares at September 30, 2022		561,376			-			70,000

Outstanding and unvested shares at January 1, 2021		382,435			44,000			-
Granted		458,467			46,197			-
Vested		(475,120	)		(56,197	)		-
Forfeited		(85,286	)		-			-
Outstanding and unvested shares at September 30, 2021		280,496			34,000			-


Stock-based compensation included in the	Three Months Ended September 30,					Nine Months Ended September 30,
consolidated statements of operations:	2022		2021			2022		2021
	($ in thousands)
Direct operating costs	$	247	$	207		$	665	$	766
General and administrative		703		737			1,848		2,482
Research and development		82		(3	)		225		206
Selling and marketing		296		63			661		552
Total stock-based compensation expense	$	1,328	$	1,004		$	3,399	$	4,006

	Three Months Ended March 31,
	2023		2022
	($ in thousands)
Direct operating costs	$	88	$	217
General and administrative		605		380
Research and development		37		70
Selling and marketing		342		220
Total stock-based compensation expense	$	1,072	$	887

	Fair Value Measurement at Reporting Date Using Significant Unobservable Inputs, Level 3
	Three Months Ended March 31,
	2023		2022
	($ in thousands)
Balance - January 1,	$	-	$	3,090
Acquisitions		-		-
Change in fair value		-		(600	)
Payments		-		-
Balance - March 31,	$	-	$	2,490


	Nine Months Ended September 30, 2022
	($ in thousands)
	Healthcare IT			Medical Practice Management		Unallocated Corporate Expenses			Total
Net revenue	$	96,146		$	10,146	$	-		$	106,292
Operating expenses:
Direct operating costs		56,878			7,988		-			64,866
Selling and marketing		7,293			21		-			7,314
General and administrative		10,213			1,312		6,954			18,479
Research and development		3,251			-		-			3,251
Change in contingent consideration		(2,890	)		-		-			(2,890	)
Depreciation and amortization		8,420			266		-			8,686
Net loss on lease termination and unoccupied lease charges		928			-		-			928
Total operating expenses		84,093			9,587		6,954			100,634
Operating income (loss)	$	12,053		$	559	$	(6,954	)	$	5,658

	Healthcare IT		Medical Practice Management		Unallocated Corporate Expenses			Total
	Three Months Ended March 31, 2023
	($ in thousands)
	Healthcare IT		Medical Practice Management		Unallocated Corporate Expenses			Total
Net revenue	$	26,954	$	3,047	$	-		$	30,001
Operating expenses:
Direct operating costs		15,693		2,414		-			18,107
Selling and marketing		2,604		8		-			2,612
General and administrative		2,496		448		2,176			5,120
Research and development		1,078		-		-			1,078
Change in contingent consideration		-		-		-			-
Depreciation and amortization		2,949		89		-			3,038
Loss on lease termination and unoccupied lease charges		269		-		-			269
Total operating expenses		25,089		2,959		2,176			30,224
Operating income (loss)	$	1,865	$	88	$	(2,176	)	$	(223	)


	Nine Months Ended September 30, 2021
	($ in thousands)
	Healthcare IT		Medical Practice Management		Unallocated Corporate Expenses			Total
Net revenue	$	92,797	$	9,340	$	-		$	102,137
Operating expenses:
Direct operating costs		55,473		7,246		-			62,719
Selling and marketing		6,446		23		-			6,469
General and administrative		10,175		1,487		6,152			17,814
Research and development		4,328		-		-			4,328
Depreciation and amortization		9,251		254		-			9,505
Loss on lease termination, impairment and unoccupied lease charges		1,664		-		-			1,664
Total operating expenses		87,337		9,010		6,152			102,499
Operating income (loss)	$	5,460	$	330	$	(6,152	)	$	(362	)


	Three Months Ended September 30, 2021
	($ in thousands)
	Healthcare IT		Medical Practice Management		Unallocated Corporate Expenses			Total
Net revenue	$	34,678	$	3,626	$	-		$	38,304
Operating expenses:
Direct operating costs		21,324		2,800		-			24,124
Selling and marketing		2,368		7		-			2,375
General and administrative		3,336		471		2,114			5,921
Research and development		488		-		-			488
Depreciation and amortization		3,459		88		-			3,547
Loss on lease termination and unoccupied lease charges		424		-		-			424
Total operating expenses		31,399		3,366		2,114			36,879
Operating income (loss)	$	3,279	$	260	$	(2,114	)	$	1,425

	○	Revenue Cycle Management (“RCM”) services including end-to-end medical billing, eligibility, analytics, and related services, all of which can be provided utilizing our technology platform and robotic process automation tools or leveraging a third-party system;
	○	Medical coding and credentialing services to improve provider collections, back-end cost containment, and drive total revenue realization for our healthcare clients; and
	○	Healthcare claims clearinghouse which enables our clients to electronically scrub and submit claims and process payments from insurance companies.

○	PM○	Practice Management (“PM”) software and related ~~tools,~~capabilities, which support our clients’ day-to-day business operations and ~~workflows;~~financial workflows, including automated insurance eligibility software, a robust billing and claims rules engine, and other automated tools designed to maximize reimbursement;

○	~~Mobile Health~~○	Patient Experience Management (“~~mHealth”~~PXM”) solutions designed to transform interactions between patients and their clinicians, including smartphone applications that assist patients and healthcare providers in the provision of healthcare ~~services;~~services, contactless digital check-in solutions, messaging, and online appointment scheduling tools;

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

○	~~Chronic care management, which provides regular remote visits with patients with chronic conditions;~~

○	~~Healthcare claims clearinghouse, which enables~~Business Intelligence (“BI”) and healthcare analytics platforms that allow our clients to ~~electronically scrub~~derive actionable insights from their vast amount of data; and ~~submit claims to, and process payments from, insurance companies;~~

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

	○	~~RCM services, which include end-to-end medical billing, eligibility, analytics, and related services, all~~Chronic care management is a program that supports care for patients with chronic conditions by certified care managers that operate under the supervision of ~~which can often~~the patient’s regular physician;
	○	Remote patient monitoring enables patient data collected outside the clinical setting through remote devices to be ~~provided either with our technology platform or through a third-party system;~~fed into their provider’s EHR to enable proactive patient care; and

	○	Telemedicine solutions which allow healthcare providers to conduct remote patient visits and extend the timely delivery of care to patients unable to travel to a provider’s office.

	○	Professional services consisting of ~~application~~a broad range of consulting services including full software implementations and ~~advisory services,~~activation, revenue cycle ~~services,~~optimization, data analytic services, and educational training ~~services.~~services;
	○	Strategic advisory services to manage system evaluations and selection, provide interim management, and operational assessments; and
	○	Workforce augmentation and on-demand staffing to support our clients as they expand their businesses, seek highly trained personnel, or struggle to address staffing shortages.

	●	Income tax expense ~~(benefit)~~ or the cash requirements to pay our taxes;
	●	Interest expense, or the cash requirements necessary to service interest on principal payments, on our debt;
	●	Foreign currency gains and losses and other non-operating expenditures;
	●	Stock-based compensation expense includes cash-settled awards and the related taxes, based on changes in the stock price;
	●	Depreciation and amortization charges;
	●	Integration costs, such as severance amounts paid to employees from acquired businesses, and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees and exit costs related to contractual agreements;
	●	Net loss on lease termination ~~impairment~~ and unoccupied lease charges; and
	●	Change in contingent consideration.

Exhibit Number		Exhibit Description

31.1		Certification of the Company’s ~~Chief~~Principal Executive Officer pursuant to the Exchange Act Rules 13a-14(a)/15d-14(a), of the Securities Exchange Act of 1934, as amended.

31.2		Certification of the Company’s ~~Chief~~Principal Financial Officer pursuant to the Exchange Act Rules 13a-14(a)/15d-14(a), of the Securities Exchange Act of 1934, as amended.

32.1*		Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation Linkbase

101.LAB		XBRL Taxonomy Extension Label Linkbase

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101.DEF		XBRL Taxonomy Extension Definition Linkbase

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

	CareCloud, Inc.

	By:	/s/ A. Hadi Chaudhry
		A. Hadi Chaudhry
		Chief Executive Officer
		Date: ~~November 3, 2022~~May 4, 2023

	By:	/s/ Bill Korn
		Bill Korn
		Chief Financial Officer
		Date: ~~November 3, 2022~~May 4, 2023