As filed with the Securities and Exchange Commission on             , 2014.

Registration No. 333-192989

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

AMENDMENT NO. 1 TO
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

MEDICAL TRANSCRIPTION BILLING, CORP.

(Exact name of registrant as specified in its charter)

 

Delaware		7389		22-3832302
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

 

7 Clyde Road
Somerset, New Jersey 08873
(732) 873-5133

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

Mahmud Haq
Chief Executive Officer
7 Clyde Road
Somerset, New Jersey 08873
(732) 873-5133

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

Copies of Communications to:

Alison Newman, Esq. Zev M. Bomrind, Esq. Fox Rothschild LLP 100 Park Avenue New York, New York 10017 (212) 878-7900		Mitchell S. Nussbaum, Esq. Norwood P. Beveridge, Jr., Esq. Loeb & Loeb LLP 345 Park Avenue New York, New York 10154 (212) 407-4000

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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

Large accelerated filer o		Accelerated filer o
Non-Accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED APRIL   , 2014

    Shares

Common Stock

 

This is an initial public offering of shares of common stock of Medical Transcription Billing, Corp.

Prior to this offering there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $9.00 and $11.00. We have applied for our common stock to be listed on the NASDAQ Global Market under the symbol “MTBC”.

We are an “emerging growth company” under federal securities laws and are subject to reduced public company reporting requirements.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 12 to read about factors you should consider before buying shares of our common stock.

 

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

		Per Share				Total
Initial public offering price		$				$
Underwriting discount		$				$
Proceeds, before expenses, to MTBC		$				$

The underwriters may also exercise their option to purchase up to an additional      shares of common stock from us, at the initial public offering price, less the underwriting discount.

 

The underwriters expect to deliver the shares against payment in New York, New York on            , 2014.

 

Prospectus dated            , 2014.

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		Page
Important Introductory Information			1
Prospectus Summary			2
Risk Factors			12
Special Note Regarding Forward-Looking Statements			31
Use of Proceeds			32
Dividend Policy			32
Capitalization			33
Dilution			35
Selected Historical Consolidated Financial Information			37
Unaudited Pro Forma Condensed Combined Financial Information			39
Management’s Discussion and Analysis of Financial Condition and Results of Operations			54
Business			74
Management			99
Executive Compensation			104
Certain Relationships and Related Party Transactions			111
Principal Stockholders			114
Description of Our Capital Stock			115
Shares Eligible for Future Sale			118
Certain Material U.S. Federal Income and Estate Tax Consequences to Non-U.S. Holders of Common Stock			120
Underwriting			124
Legal Matters			129
Experts			129
Where You Can Find More Information			129
Index to Financial Statements			F-1

 

The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, governmental publications, reports by market research firms or other independent sources. Some data are also based on our good faith estimates.

 

Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

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IMPORTANT INTRODUCTORY INFORMATION

In this prospectus, unless the context otherwise requires, we use the terms “MTBC,” “we,” “us,” “the company” and “our” to refer to Medical Transcription Billing, Corp. and its wholly-owned subsidiary, Medical Transcription Billing Company (Private) Limited, a private limited company organized under the laws of Pakistan, and does not include any of the following companies, which we refer to as the “Target Sellers,” whose businesses we will acquire upon the close of this offering:

Concurrently with the consummation of the offering made by this prospectus, through a series of asset purchases, we will acquire the businesses of the Target Sellers. The aggregate purchase price will amount to approximately $34.7 million (assuming an initial public offering price of $10.00 per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus), consisting of cash in the amount of approximately $18.2 million, and 1,750,249 shares of our common stock with a fair value of approximately $17.5 million based on the initial public offering price of the shares sold in this offering. Pursuant to the terms of the respective purchase agreements, the aggregate purchase price we will pay for the assets of each of the Target Sellers will be calculated as a multiple of either 1.5 or 2.0 of the revenue generated by such Target Seller in the most recent four quarters included in this prospectus from its customers that are in good standing as of the closing date. See the “Notes to Unaudited Pro Forma Condensed Combined Financial Information” for a discussion of the accounting treatment for our acquisitions.

All of the shares to be issued to the Target Sellers will be deposited into escrow to secure our rights (i) to be indemnified under the purchase agreements, and (ii) to cancel a portion of the shares in the event our revenues from the Target Sellers’ customers in the 12 months following the closing are below specified thresholds. With respect to each Target Seller, 15% of the escrowed shares will be eligible for release six months following the closing. With respect to Omni, an additional 15% of the escrowed shares will be eligible for release nine months following the closing and for all the Target Seller’s, the remaining shares will be eligible for release following the determination of such Target Seller’s revenue in the 12 months following the closing. In addition, 10% of the cash consideration payable for the acquisition of Practicare and 15% of the cash consideration payable for the acquisition of CastleRock will be held in escrow for 120 days following the closing to satisfy indemnification claims we may have during that period.

Unless we close the acquisition of all of the Target Sellers, we will not close any of those acquisitions and we will not close this offering. See “Business — Acquisitions” for further information on our acquisition of the Target Sellers.

Unless otherwise indicated, all share, per share and financial data set forth in this prospectus have not been adjusted to give effect to the closing of the acquisition of the Target Sellers.

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PROSPECTUS SUMMARY

The following summary highlights selected information contained in this prospectus. This summary does not contain all the information that may be important to you. You should read the more detailed information contained in this prospectus including, but not limited to, the risk factors beginning on page 12.

Medical Transcription Billing, Corp. is a healthcare information technology company that provides a fully integrated suite of proprietary web-based solutions, together with related business services, to healthcare providers practicing in ambulatory care settings. Our integrated Software-as-a-Service (or SaaS) platform helps our customers increase revenues, streamline workflows and make better business and clinical decisions, while reducing administrative burdens and operating costs. In addition to our experienced team in the United States, we employ a highly educated workforce of more than 1,000 people in Pakistan, where we believe labor costs are approximately one-half the cost of comparable India-based employees, thus enabling us to deliver our solutions at competitive prices.

Our flagship offering, PracticePro, empowers healthcare practices with the core software and business services they need to address industry challenges, including the Patient Protection and Affordable Care Act (“Affordable Care Act”), on one unified SaaS platform. We deliver powerful, integrated and easy-to-use ‘big practice solutions’ to small and medium practices, which enable them to efficiently operate their businesses, manage clinical workflows and receive timely payment for their services. PracticePro includes:

As of December 31, 2012, we served approximately 400 practices representing approximately 1,320 providers (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services), practicing in approximately 55 specialties and subspecialties, in 39 states. As of December 31, 2013, we served approximately 450 practices representing approximately 1,110 providers, practicing in 50 specialties and subspecialties, in 36 states. Pro forma for the acquisition of the Target Sellers, as of December 31, 2013, we served approximately 950 practices representing approximately 2,110 providers, practicing in approximately 50 specialties and subspecialties, in 40 states. Approximately 98% of the practices we serve consist of one to ten providers, with the majority of the practices we serve being primary care providers. However, our solutions are scalable and are appropriate for larger healthcare practices across a wide range of specialty areas. In fact, our largest customer is a hospital-based group with more than 120 providers.

Our growth strategy includes acquiring smaller revenue cycle management companies and then migrating the customers of those companies to our solutions. The revenue cycle management service industry is highly fragmented, with many local and regional revenue cycle management companies serving small medical practices. We believe that the industry is ripe for consolidation and that we can achieve significant growth through acquisitions. We estimate that there are more than 1,500 companies in the United States providing revenue cycle management services and that no one company has more than a 5% share of the market. We further believe that it is becoming increasingly difficult for traditional revenue cycle management companies to meet the growing technology and business service needs of healthcare providers without a significant investment in information technology infrastructure.

In addition, our growth strategy includes strategic partnerships with other industry participants, including electronic health records vendors, in which the vendors refer customers to our services. While we offer our own electronic health records, our strategy includes providing integrated offerings utilizing third party electronic health records while offering customers MTBC’s revenue cycle management, practice management

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and mobile health capabilities. Accordingly, upon the completion of this offering, we intend to hire sales and marketing executives to spearhead our customer acquisition initiative, which will include growing existing and developing new strategic partnerships. We believe that these new team members will also be able to successfully leverage the Target Sellers’ network of relationships and our existing network. By devoting greater resources to sales and marketing, we expect that our organic growth will increase more rapidly, as our current organic growth is driven primarily by customer referrals and internet search engine optimization techniques.

For the years ended December 31, 2012 and December 31, 2013, without giving effect to the acquisition of the assets of the Target Sellers, our total revenue was $10.0 million and $10.5 million, respectively. For the year ended December 31, 2012, our net income was $ 117,000 and for the Year ended December 31, 2013, our net loss was ($178,000). For the years ended December 31, 2012 and December 31, 2013, our EBITDA was $870,000 and $1,052,000, respectively. Because EBITDA is closely related to our cash flow from operations, management uses EBITDA as a financial measure to evaluate the profitability and efficiency of our business model. For information on how we define and calculate EBITDA, and a reconciliation of net income to EBITDA, see the section titled “— Summary Consolidated Financial — Other Financial Data.”

Pro forma for the acquisition of the Target Sellers, our total revenue for the twelve months ended December 31, 2013 was $33.1 million, our net loss was ($5.0 million), and our EBITDA was $2.2 million. The large net loss is due primarily to amortization of intangibles from the acquisition of the Target Sellers, estimated at $8.3 million.

Industry Overview

The modern American healthcare industry is characterized by inefficiencies, waste, complexity, an underutilization of technology and a lack of transparency. According to a recent report issued by the Institute of Medicine, approximately $2.6 trillion was spent in the United States on healthcare in 2011, of which $750 billion was wasteful spending that does not improve the quality of care that patients receive. An April 2012 study cited by Health Affairs, a health policy journal, estimates that between $476 billion and $992 billion of healthcare spending in 2011 was wasted, with a third of that waste being funded by Medicare and Medicaid programs. Healthcare spending in the United States is widely viewed as growing at an unsustainable rate, and policymakers and payers are continuously seeking ways to reduce that growth.

The Affordable Care Act and other recent legislative, regulatory and industry drivers are directed toward addressing many of these challenges. For decades, the U.S. healthcare delivery system has been characterized by a vast cottage industry of small, independent practices functioning in a low-technology fee-for-service environment. Presently, there are more than 500,000 U.S. physicians practicing in ambulatory care settings and it is estimated that approximately 70% of these providers are practicing in groups with 10 or fewer physicians. Recent changes in the industry, including legislative reform and increasing reimbursement complexity, have created significant opportunities for MTBC, as traditional practice tools are not well-suited for the modern medical practice.

Increasingly complex reimbursement processes.  New laws and payer requirements have further complicated insurance reimbursement processes. For example, Medicare, Medicaid and commercial insurances are increasingly requiring proof of adherence to best practices and improved patient health outcomes to support full reimbursement. Moreover, an upcoming shift to a new generation of insurance codes will dramatically increase the complexity associated with selecting appropriate procedure and diagnosis codes needed to support proper claim reimbursement.

Movement toward healthcare information technology.  Since 2011, the Federal government has offered financial incentives to eligible healthcare providers who adopt and meaningfully use electronic health record technology. Beginning in 2015, providers who are not meaningfully using this technology will incur penalties and these penalties will increase every year through 2019. While these incentives and looming penalties have encouraged many providers to adopt and meaningfully use electronic health record software, we believe that most providers are not utilizing an integrated platform that combines practice management, business intelligence, and revenue cycle management. The lack of an integrated platform leaves them ill-equipped to address the multitude of rapidly growing industry challenges.

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Shift in Focus to Preventive Care.  In an effort to avoid the negative health effects and increased costs associated with undetected and untreated chronic conditions, the Affordable Care Act requires most health insurance plans to provide co-payment and deductible-free coverage for preventive health services, such as annual well visits. Many believe that this shift in focus will, in the long-term, reduce costs and improve patient health.

Inaccessibility of critical data.  To thrive in the emerging healthcare landscape, healthcare practices need timely information, such as health insurance plan eligibility and coverage details, provider performance and productivity data and clinical and reimbursement benchmarking. However, we believe that most small and medium size practices do not have access to this type of real-time data, business intelligence and analytical tools and thus struggle to efficiently operate their practices and make optimal decisions.

Our Solution

We believe that our fully integrated solutions uniquely address the challenges in the industry, including those presented by the Affordable Care Act. Our solutions dramatically simplify the complexities inherent in the reimbursement process and thereby deliver objectively superior results, such as reduced claim denial rates, improved customer days in accounts receivable, reduced patient no-shows, increased well visit encounters and reimbursement. Our solutions empower our customers with the real-time data they need to be efficient and make better decisions, such as real-time insurance eligibility and deductible details, provider productivity details and payer benchmarking.

Our fully integrated suite of technology and business service solutions is designed to enable healthcare practices to thrive in the midst of a rapidly changing environment in which managing reimbursement, clinical workflows and day-to-day administrative tasks is becoming increasingly complex, costly and time-consuming. Moreover, the standard offering fee for our complete, integrated, end-to-end solution is 5% of a practice’s healthcare-related revenues plus a nominal one-time setup fee, and is among the lowest in the industry.

Our Strategy

Our objective is to become a leading provider of integrated, end-to-end software and business service solutions to healthcare providers practicing in an ambulatory setting. To achieve this objective, we employ the following strategies:

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Our Service Offerings

We offer a suite of fully-integrated, web-based SaaS platform and business services designed for healthcare providers. Our products and services offer healthcare providers a unified solution designed to meet the healthcare industry’s demand for the delivery of cost-efficient, quality care with measureable outcomes. The four primary components of our proprietary web-based suite of services are: (i) practice management applications, (ii) a certified electronic health record solution, (iii) revenue cycle management services and (iv) mobile health applications.

Our flagship product, PracticePro, offers all software components in one seamlessly-integrated, end-to-end solution. Our web-based electronic health records is also available to customers as a stand-alone product. We regularly update our software platform with the goal of staying on the leading edge of industry developments, payer reimbursements trends and new regulations.

Web-based Practice Management Application

Our proprietary, web-based practice management application automates the labor-intensive workflow of a medical office in a unified and streamlined SaaS platform. The various functions of the platform collectively support the entire workflow of the day-to-day operations of a medical office in an intuitive and user-friendly format. For example, our platform provides office staff with real-time insurance details to allow them to more efficiently collect patient payments; its automated appointment reminders reduce patient no-show rates, and scheduling functionality results in increased reimbursable patient well visit appointments. A simple, individual and secure login to our web-based platform gives physicians, other healthcare providers and staff members access to a vast array of real time practice management data which they can access at the office or from any other location where they can access the Internet. Users can customize the “Practice Dashboard” to display only the most useful and relevant information needed to carry out their particular functions. We believe that this streamlined and centralized automated workflow allows providers to focus on delivering quality patient care rather than office administration.

Web-based Electronic Health Records

Our web-based electronic health records solution is one of the less than 90 unique ambulatory electronic health record products that, as of March 1, 2014, has received 2014 Edition ONC-ACB certification as a Complete Ambulatory electronic health records. Moreover, KLAS, a leading independent industry assessor of healthcare information technology products, recently issued its annual electronic health records ranking and MTBC placed number five in our target market of one to ten providers, outperforming most leading electronic health records. A healthcare provider can use our solution to demonstrate “meaningful use” under federal law to earn incentives and avoid penalties. Our web-based electronic health records allows a provider to view all patient information in one online location, thus avoiding the need for numerous charts and records for each patient. Utilizing our web-based electronic health records solution, providers can track patients from their initial appointments; chart clinical data, history, and other personal information; enter and submit claims for medical services; and review and respond to queries for additional information regarding the billing process. Additionally, the electronic health record software delivers a robust document management system to enable providers to transition to paperless environments. The document management function makes available electronic connectivity between practitioners and patients, thereby streamlining patient care coordination and communications.

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Revenue Cycle Management and other Technology-driven Business Services

Our proprietary revenue cycle management offering is designed to improve the medical billing reimbursement process, allowing healthcare providers to accelerate and increase collections, reduce errors in submission and streamline workflow to free up practitioners to focus on patient care. Customers using PracticePro will generally see an improvement in their collections, as illustrated by the following:

These rates are among the most competitive in the industry and compare favorably with the performance of our largest competitor, among others. Our revenue cycle management service employs a proprietary rules-based system designed and constantly updated by our knowledgeable workforce, which screens and scrubs claims prior to submission for payment.

Mobile Health Solutions

The functionality of our cloud-based platform is extended to mobile devices through our integrated suite of mobile health applications. These mobile health applications include physician end-user tools that support, among other things, electronic prescribing, the capture of billing charges in the current medical coding formats, and the creation and secure transfer of clinical audio notes that are converted into text and billing charges. Our patient applications allow patients to access their medical information, securely communicate with their doctors’ office, schedule appointments, request prescription refills, pay balances and check-in for office appointments.

Risk Relating to our Acquisition Strategy

Following our past acquisitions, some acquired customers terminated their relationships with us. These terminations occurred for a variety of reasons, including because of our transition of workflow from local employees previously assigned to their account to our offshore team members; actual or perceived disruptions to customers’ businesses; our migration of customers from their existing practice management software platform to our solution; and the exacerbation of the strain that already existed in some of the customers’ relationships with the acquired companies. For example, following our 2010 acquisition of the customers of Medical Accounting Billing Company, we retained a key employee of the seller to assist us in transitioning the acquired customers to our solution. However, that employee became disabled by an illness soon after closing, becoming incapable of effectively guiding the accounts through the transition. As a result, we eventually lost all of the acquired customers and were required to write-off intangible assets in the amount $126,000 in 2012. In addition, of the eight practices we acquired in our June 2011 acquisition of a small New Jersey-based revenue cycle management company, only two are current customers of ours.

During 2012, we acquired four revenue cycle management companies and successfully migrated a majority of their customers to PracticePro within 120 days of closing. One year after acquisition, the average quarterly revenue generated from the customers acquired in our 2012 acquisitions was 85% of the quarterly revenue generated from these customers in the quarter preceding the respective acquisitions, and for the quarter ended December 31, 2013, our revenue from these customers was 75% of the revenue generated from such customers in the quarter preceding the acquisitions. Approximately 60% of the practices we acquired in those transactions remained our customers as of December 31, 2013. In addition, following our most recent acquisition in June 30, 2013, we successfully migrated 50% of the acquired customers to PracticePro within 90 days of closing and 74% within 180 days, retained 88% of acquired customers after 180 days. Notwithstanding the recent improvement in our migration and retention of acquired customers, we expect to experience customer loss following our acquisition of the Target Sellers and any other future acquisitions for a variety of reasons, including our inability to transition the existing workflow to our off shore infrastructure and the existing strain on customer relationships at the time of acquisition.

We will seek to address the challenges we have experienced in prior acquisitions by working more closely with acquired customers in the future to understand which combination of software and services is

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best for their practice. To that end, we plan on retaining a larger portion of the Target Sellers’ existing workforce for a longer period of time than in previous acquisitions, as well as developing integrations with existing software solutions to ensure customer satisfaction and retention.

Other Risks Relating to Our Business

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described in “Risk Factors” beginning on page 12 of this prospectus before making a decision to invest in our common stock. If any of these risks actually occurs, our business financial condition and results of operations would likely be negatively affected. In such case, the trading price of our common stock would likely decline, and you may lose part, or all, of your investment. Below is a summary of some of the principal risks we believe we face:

Corporate Information

We were incorporated in Delaware on September 28, 2001 under the name Medical Transcription Billing, Corp. Our principal executive offices are located at 7 Clyde Road, Somerset, New Jersey 08873, and our telephone number is (732) 873-5133. Our website address is www.mtbc.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.

MTBC, MTBC.com and A Unique Healthcare IT Company, and other trademarks and service marks of MTBC appearing in this prospectus are the property of MTBC. Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective holders.

We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of the last day of the fiscal year following the fifth anniversary of the completion of this offering, the last day of the fiscal year in which we have total annual gross revenue of at least $1.0 billion, the date on which we are deemed to be a large accelerated filer (this means the market value of our common stock that is held by non-affiliates exceeds

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$700 million as of the end of the second quarter of that fiscal year), or the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:

However, we are choosing to “opt out” of the extended transition periods available under the JOBS Act for complying with new or revised accounting standards.

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The Offering

On April 4, 2014 we amended and restated our certificate of incorporation to effect a 8.65 for 1 stock split to ensure that our authorized and outstanding capital stock is sufficient to consummate this offering. Unless the context indicates otherwise, the number of shares of common stock to be outstanding after this offering:

Unless otherwise indicated, the information presented in this prospectus:

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SUMMARY CONSOLIDATED FINANCIAL DATA

The historical consolidated statement of operations data for MTBC presented below for the years ended December 31, 2012 and 2013 and the consolidated balance sheet data for MTBC at December 31, 2012 and 2013 have been derived from our audited financial statements appearing elsewhere in this prospectus.

We derived the summary unaudited pro forma condensed combined financial data for MTBC as of and for the year ended December 31 2013 from the unaudited pro forma condensed combined financial statements you can find elsewhere in this prospectus. These pro forma financial data give effect to this offering and our completed and planned acquisitions as if each of these had occurred on January 1, 2013 (in the case of the consolidated income statement data) or on December 31, 2013 (in the case of the consolidated balance sheet data). You should read this data in conjunction with the information set forth under “Unaudited Pro Forma Condensed Combined Financial Information,” which describes these transactions and the related adjustments in greater detail.

The financial data set forth below are only a summary You should read these summary financial data in conjunction with the disclosure under “Capitalization,” “Unaudited Pro Forma Condensed Combined Financial Information,” “Selected Historical Consolidated Financial Information” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the related notes thereto included elsewhere in this prospectus. Our historical results are not necessarily indicative of, and do not represent anything about our future operations.

		Historical MTBC								Pro Forma MTBC
Consolidated Statements of Operations Data		Year ended December 31,								Year ended December 31,
		2012				2013				2013
		(in thousands, except per share data)
Net revenue		$	10,017			$	10,473			$	33,083
Operating expenses:
Direct operating costs			4,257				4,273				16,848
Selling, general and administrative			4,663				4,992				13,909
Research and development			396				386				386
Depreciation and amortization			679				949				9,542
Total operating expenses			9,995				10,600				40,685
Operating income (loss)			22				(127	)			(7,602	)
Interest expense – net			74				136				211
Other income – net			169				230				270
Income (loss) before provision (benefit) for income taxes			117				(33	)			(7,543	)
Income tax provision (benefit)			-				145				(2,516	)
Net income (loss)		$	117			$	(178	)		$	(5,027	)
Weighted average common shares outstanding
Basic and diluted			5,102				5,102
Net income (loss) per share
Basic and diluted		$	0.02			$	(0.03	)
Pro forma weighted average common shares outstanding
Basic and diluted											[]
Pro forma net loss per share
Basic and diluted											[]

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		As of December 31,								As of December 31, 2013
		Historical MTBC												Pro Forma As Adjusted(3)
Consolidated Balance Sheet Data		2012				2013				Pro Forma(2)
			(in thousands)
Cash		$	268			$	498			$	(17,728	)
Working capital (net)(1)			(504	)			(1,620	)			(19,749	)
Total assets			3,484				5,773				22,268
Long term debt			330				1,634				1,634
Stockholders' equity			406				119				16,614

		Historical MTBC								Pro Forma MTBC
		Year ended December 31,								Year ended December 31,
Other Financial Data		2012				2013				2013
			(in thousands)
EBITDA(4)		$	870			$	1,052			$	2,210

		Historical MTBC								Pro Forma MTBC
		Year ended December 31,								Year ended December 31,
Reconciliation of net income (loss) to EBITDA		2012				2013				2013
		(in thousands)
Net income (loss)		$	117			$	(178	)		$	(5,027	)
Depreciation			263				234				375
Amortization			416				715				9,167
Interest expense – net			74				136				211
Income tax provision (benefit)			—				145				(2,516	)
EBITDA		$	870			$	1,052			$	2,210

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RISK FACTORS

If you purchase our securities, you will assume a high degree of risk. In deciding whether to invest, you should carefully consider the following risk factors, as well as the other information contained elsewhere in this prospectus. Any of the following risks could have a material adverse effect on our business, financial condition, results of operations or prospects and cause the value of our securities to decline, which could cause you to lose all or part of your investment.

Risks Related to Our Acquisition Strategy

If we do not manage our growth effectively, our revenue, business and operating results may be harmed.

Our strategy is to expand through the acquisition of additional RCM companies and organic growth. Since 2006, we have acquired eight RCM companies and entered into agreements with two additional RCM companies under which we service all of their customers. Our prior acquisitions were on a much smaller scale and may not be indicative of our ability to successfully manage our currently proposed or future acquisitions. Our acquisition of the Target Sellers and any future acquisitions may require greater than anticipated investment of operational and financial resources as we seek to migrate customers of the Target Sellers and any acquired companies to PracticePro. Acquisitions may also require the integration of different software and services, assimilation of new employees, diversion of management and IT resources, increases in administrative costs and other additional costs associated with any debt or equity financings undertaken in connection with such acquisitions. We cannot assure you that any acquisition we undertake will be successful. Future growth will also place additional demands on our customer support, sales, and marketing resources, and may require us to hire and train additional employees. We will need to expand and upgrade our systems and infrastructure to accommodate our growth. The failure to manage our growth effectively will materially and adversely affect our business.

We may be unable to retain customers of the Target Sellers following their acquisition, which may result in a decrease in our revenues and operating results.

Concurrently with the consummation of the offering made by this prospectus, we will acquire the Target Sellers via asset purchase agreements, including approximately 500 healthcare practice customers as of the date of this prospectus. A majority of the customers of the Target Sellers have the right to terminate their practice management, EHR and RCM contracts for any reason at any time upon notice of 90 days or less. These customers may elect to terminate their contracts as a result of our acquisition or to not renew their contracts upon the expiration of their terms. In the past, our failure to retain acquired customers has led to decreases in our revenues. For example, our revenues for the year ended December 31, 2013 increased by $456,000 as compared to the year ended December 31, 2012, even though we acquired Metro Medical on June 30, 2013 which contributed $1.5 million of revenue in 2013, primarily as a result of our loss of a large customer we previously acquired in 2010, and our net loss for the year ended December 31, 2013 was ($178,000) compared to net income of $117,000 for the year ended December 31, 2012. In addition, of the practices we acquired in the four acquisitions we completed in 2012, approximately 60% were our customers as of December 31, 2013. Our inability to retain customers of the Target Sellers following their acquisition could adversely impact our ability to benefit from those acquisitions and increase our future revenues and operating income.

Our inability to successfully migrate customers of the Target Sellers to our proprietary solutions and services will decrease our profitability.

A major component of our business plan is to migrate most of the customers of the Target Sellers from the existing practice management, EHR and RCM solutions they are using to PracticePro. In our past acquisitions, we experienced customer loss while attempting to migrate customers from their existing practice management software platform to our solution due to the customers’ comfort with their existing software. In particular, following our 2010 acquisition of Medical Accounting Billing Company customers, we retained a key employee of the seller to assist us in transitioning the acquired customers to our solution. However, that employee became disabled by an illness soon after closing, becoming incapable of effectively guiding the accounts through the transition. As a result, we eventually lost all of the acquired customers and were required

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to write-off intangible assets in the amount $126,000 in 2012. In addition, of the eight practices we acquired in our June 2011 acquisition of a small New Jersey-based revenue cycle management company, only two are current customers of ours. However, more recently, we acquired four RCM companies during 2012, and successfully migrated a majority of the customers of those companies from eight distinct RCM platforms to PracticePro within 120 days of closing. The migration of customers of the Target Sellers may also entail significant costs and IT resources, and the failure or delay in migrating a significant portion of such customers could occur. Our failure or delay in successfully migrating the customers of the Target Sellers to PracticePro will negatively impact our ability to retain those customers and to assist those practices in increasing collections, thereby reducing our revenue and profitability.

Our pro forma results may not be indicative of our future performance because we may be unable to retain or successfully transition the customers of the Target Sellers.

The customers of the Target Sellers are currently using the practice management, EHR and RCM solutions provided by the Target Sellers. Because we may be unable to retain the customers of the Target Sellers following their acquisition or successfully migrate those customers from the solutions they are currently using to PracticePro, the unaudited pro forma condensed combined financial information in this prospectus may not be indicative of what our operating results and financial condition would have been for the periods presented had the acquisition of the Target Sellers taken place on the dates indicated or of our future financial condition or operating results. In addition, the unaudited pro forma condensed combined balance sheets included in this prospectus reflect preliminary estimates of the values of assets to be acquired and liabilities to be assumed, and those values could differ materially once we complete our final valuations of those assets and liabilities.

We may be unable to implement our strategy of acquiring additional RCM companies due to competition.

Except for the acquisition of the Target Sellers, we have no understanding or commitments with respect to any other acquisition as of the date of this prospectus. Although we expect that one or more acquisition opportunities will become available in the future, we may not be able to acquire any additional RCM companies at all or on terms favorable to us. Certain of our larger, better capitalized competitors may seek to acquire some of the RCM companies we may be interested in. Competition for acquisitions would likely increase acquisition prices and result in us having fewer acquisition opportunities.

Acquisitions may subject us to additional unknown risks which may affect our customer retention and cause a reduction in our revenues.

In completing the acquisition of the Target Sellers or any future acquisition, we will rely upon the representations and warranties and indemnities made by the sellers with respect to each acquisition as well as our own due diligence investigation. We cannot assure you that such representations and warranties will be true and correct or that our due diligence will uncover all materially adverse facts relating to the operations and financial condition of the acquired companies or their customers. To the extent that we are required to pay for obligations of an acquired company, or if material misrepresentations exist, we may not realize the expected benefit from such acquisition and we will have overpaid in cash and/or stock for the value received in that acquisition.

Future acquisitions may result in potentially dilutive issuances of equity securities, the incurrence of indebtedness and increased amortization expense.

Future acquisitions may result in dilutive issuances of equity securities, the incurrence of debt, the assumption of known and unknown liabilities, the write-off of software development costs and the amortization of expenses related to intangible assets, all of which could have an adverse effect on our business, financial condition and results of operations.

We structure our acquisitions as asset purchases, which may limit the ability of some of the acquired assets to be transferred to us due to contractual provisions restricting the assignment of assets, and subjects us to the risk that creditors of the seller may challenge these transactions.

Our acquisitions are structured as the purchase of assets, primarily consisting of medical billing contracts with healthcare providers. This structure may limit the transferability of some of the acquired assets, including

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contracts that have contractual provisions limiting their assignment. In our prior acquisitions, substantially all of the medical billing contracts we acquired did not have restrictions on their assignment to us. However, other medical billing contracts we may seek to acquire in the future may be subject to these restrictions. Furthermore, certain software and vendor contracts which we may seek to acquire for use during the transition period following our acquisitions may not be assignable to us, which may disrupt the operations of the acquired customers.

Furthermore, creditors of a seller from whom we acquire assets (including creditors of the Target Sellers) could challenge the acquisition as a fraudulent transfer under the U.S. Bankruptcy Code and comparable provisions of state fraudulent transfer laws. In general, a transfer of assets can be found to be fraudulent and avoided if a court determines that the transferor, at the time of the asset transfer (i) delivered such assets with the intent to hinder, delay or defraud its existing or future creditors or (ii) received less than reasonably equivalent value and the transferor was insolvent at the time of the transfer or was rendered insolvent as a result of the transfer. If a court determines that any of our acquisitions constitutes a fraudulent transfer, the court could order us to return to the transferor or its creditors the acquired assets, their value, or payments received by us on account of such assets.

Risks Related to Our Business

We operate in a highly competitive industry, and our competitors may be able to compete more efficiently or evolve more rapidly than we do, which could have a material adverse effect on our business, revenue, growth rates and market share.

The market for practice management, EHR and RCM information solutions and related services is highly competitive, and we expect competition to increase in the future. We face competition from other providers of both integrated and stand-alone practice management, EHR and RCM solutions, including competitors who utilize a web-based platform and providers of locally installed software systems. Our competitors include larger healthcare IT companies, such as athenahealth, Inc., Allscripts Healthcare Solutions, Inc. and Greenway Medical Technologies, Inc., all of which may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, regulations or customer needs and requirements. Many of our competitors have longer operating histories, greater brand recognition and greater financial, marketing and other resources than us. We also compete with various regional RCM companies, some of which may continue to consolidate and expand into broader markets. We expect that competition will continue to increase as a result of incentives provided by the HITECH Act, and consolidation in both the information technology and healthcare industries. Competitors may introduce products or services that render our products or services obsolete or less marketable. Even if our products and services are more effective than the offerings of our competitors, current or potential customers might prefer competitive products or services to our products and services. In addition, our competitive edge could be diminished or completely lost if our competition develops similar offshore operations in Pakistan or other countries, such as India and the Philippines, where labor costs are lower than those in the U.S. (although higher than in Pakistan). Pricing pressures could negatively impact our margins, growth rate and market share.

If we are unable to successfully introduce new products or services or fail to keep pace with advances in technology, we would not be able to maintain our customers or grow our business which will have a material adverse effect on our business.

Our business depends on our ability to adapt to evolving technologies and industry standards and introduce new products and services accordingly. If we cannot adapt to changing technologies and industry standards and meet the requirements of our customers, our products and services may become obsolete, and our business would suffer. Because both the healthcare industry and the healthcare IT technology market are constantly evolving, our success will depend, in part, on our ability to continue to enhance our existing products and services, develop new technology that addresses the increasingly sophisticated and varied needs of our customers, respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis, educate our customers to adopt these new technologies, and successfully assist them in transitioning to our new products and services. The development of our proprietary technology entails significant technical and business risks. We may not be successful in developing, using, marketing, selling, or maintaining new technologies effectively or adapting our proprietary technology to evolving customer

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requirements or emerging industry standards, and, as a result, our business and reputation could suffer. We may not be able to introduce new products or services on schedule, or at all, or such products or services may not achieve market acceptance. A failure by us to introduce new products or to introduce these products on schedule could cause us to not only lose our current customers but to fail to grow our business by attracting new customers.

The continued success of our business model is heavily dependent upon our operations in Pakistan, and any disruption to those operations will adversely affect us.

The majority of our operations, including the development and maintenance of our Web-based platform, our customer support services and a substantial portion of our sales and marketing efforts, are performed by our highly educated workforce of more than 1,000 employees in Pakistan, which has experienced, and continues to experience, political and social unrest and acts of terrorism. Conditions in Pakistan may further deteriorate following the planned withdrawal of U.S. armed forces from neighboring Afghanistan. The performance of our operations in Pakistan, and our ability to maintain our offshore offices, is an essential element of our business model, as the labor costs in Pakistan are substantially lower than the cost of comparable labor in India, the United States and other countries, and allows us to competitively price our products and services. Our competitive advantage will be greatly diminished and may disappear altogether if our operations in Pakistan are negatively impacted. Our operations in Pakistan may be negatively impacted by any number of factors, including political unrest; social unrest; terrorism; war; vandalism; currency fluctuations; changes to the law of Pakistan, the United States or any of the states in which we do business; or increases in the cost of labor and supplies in Pakistan. Our operations in Pakistan may also be affected by trade restrictions, such as tariffs or other trade controls. If we are unable to continue to leverage the skills and experience of our highly educated workforce in Pakistan, we may be unable to provide our products and services at attractive prices, and our business would be materially and negatively impacted or discontinued.

Our offshore operations expose us to additional business and financial risks which could subject us to civil and criminal liability.

The risks and challenges associated with our operations outside the United States include laws and business practices favoring local competitors; compliance with multiple, conflicting and changing governmental laws and regulations, including employment and tax laws and regulations; and fluctuations in foreign currency exchange rates. Foreign operations subject us to numerous stringent U.S. and foreign laws, including the Foreign Corrupt Practices Act, or FCPA, and comparable foreign laws and regulations that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. and other business entities for the purpose of obtaining or retaining business. Safeguards we implement to discourage these practices may prove to be less than effective and violations of the FCPA and other laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, including class action lawsuits and enforcement actions from the SEC, Department of Justice and overseas regulators.

Government programs in the United States initiated to accelerate the adoption and utilization of EHR solutions may not be effective in changing the behavior of providers or may not be fully implemented or fully funded by the government, which could cause a lack of demand for our products and services.

While government programs have been initiated to improve the efficiency and quality of the healthcare sector, these programs may not be fully implemented or fully funded and there is no guarantee that our customers will receive any of these funds. Providers may also be slow to adopt EHR solutions in response to these government programs, may not select our products and services, or may decide not to implement an EHR system at all. Adoption of EHR technology imposes increased costs on providers and requires providers to spend time becoming familiar with its use. Any delay in the purchase of our EHR solutions and services in response to government programs, or the failure of providers to purchase an EHR solution, could have an adverse effect on our ability to grow our business. It is also possible that Congress could repeal or not fund the HITECH Act as originally planned or otherwise amend it in a manner that would have an adverse effect on our business.

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Changes in the healthcare industry could affect the demand for our services and may result in a decrease in our revenues and market share.

As the healthcare industry evolves, changes in our customer base may reduce the demand for our services, result in the termination of existing contracts, and make it more difficult to negotiate new contracts on terms that are acceptable to us. For example, the current trend toward consolidation of healthcare providers may cause our existing customer contracts to terminate as independent practices are merged into hospital systems or other healthcare organizations. Such larger healthcare organizations may have their own practice management, EHR and RCM solutions, reducing demand for our services. If this trend continues, we cannot assure you that we will be able to continue to maintain or expand our customer base, negotiate contracts with acceptable terms, or maintain our current pricing structure, which would result in a decrease in our revenues and market share.

If providers do not purchase our products and services or delay in choosing our products or services, we may not be able to grow our business.

Our business model depends on our ability to sell our products and services. Acceptance of our products and services may require providers to adopt different behavior patterns and new methods of conducting business and exchanging information. Providers may not integrate our products and services into their workflow and may not accept our solutions and services as a replacement for traditional methods of practicing medicine. Providers may also choose to buy our competitors’ products and services instead of ours. Achieving market acceptance for our solutions and services will continue to require substantial sales and marketing efforts and the expenditure of significant financial and other resources to create awareness and demand by providers. If providers fail to broadly accept our products and services, our business, financial condition and results of operations will be adversely affected.

If the revenue of our customers decreases, or if our customers cancel or elect not to renew their contracts, our revenue will decrease.

Under most of our customer contracts, we base our charges on a percentage of the revenue that our customer collects through the use of our services. Many factors may lead to decreases in customer revenue, including:

The current economic situation may give rise to several of these factors. For example, patients who have lost health insurance coverage due to unemployment or who face increased deductibles imposed by financially struggling employers or insurers could reduce the number of visits those patients make to our customers. Patients without health insurance or with reduced coverage may also default on their payment obligations at a higher rate than patients with coverage. Added financial stress on our customers could lead to their acquisition or bankruptcy, which could cause the termination of some of our service relationships. With a reduction in tax revenue, state and federal government healthcare programs, including reimbursement programs such as Medicaid, may be reduced or eliminated, which could negatively impact the payments that our customers receive. If our customers’ revenue decreases for any of the above or other reasons, or if our customers cancel or elect not to renew their contracts with us, our revenue will decrease.

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We have incurred recent operating losses, and we may not be able to achieve or subsequently maintain profitability in the future.

Although we generated net income of $117,000 for the year ended December 31, 2012, we generated a net loss of ($178,000) for the year ended December 31, 2013. Our net income included exchange rate gains of $153,000 in the year ended December 31, 2012 and $200,000 in the year ended December 31, 2013. On a pro forma basis, if we had acquired the Target Sellers on January 1, 2013 and had not effected any cost-saving measures, including utilizing our offshore workforce, we would have reported a net loss of ($5.0 million) for the year ended December 31, 2013, primarily due to an estimated $8.3 million of amortization of intangible assets from the acquisition of the Target Sellers.

We may not succeed in achieving efficiencies from our acquisition of the Target Sellers, including by moving labor to our offshore subsidiary, in an amount necessary to offset increased costs resulting from the acquisitions, including an estimated $8.3 million in increased amortization expense associated with $24.9 million of additional intangible assets, and we may continue to incur losses in future periods. Furthermore, because we are acquiring all three Target Sellers simultaneously, we expect that the pace of cost reductions will be slower as compared to cost reductions we effected, for example, following our acquisition of Metro Medical. We expect to incur additional operating expenses associated with our new status as a public company and we intend to continue to increase our operating expenses as we grow our business. We also expect to continue to make investments in our proprietary technology, sales and marketing, infrastructure, facilities and other resources as we seek to grow, thereby incurring additional costs. If we are unable to generate adequate revenue growth and manage our expenses, we may continue to incur losses in the future and may not be able to achieve or maintain profitability.

As a result of our variable sales and implementation cycles, we may be unable to recognize revenue from prospective customers on a timely basis and we may not be able to offset expenditures.

The sales cycle for our services can be variable, typically ranging from two to four months from initial contact with a potential customer to contract execution, although this period can be substantially longer. During the sales cycle, we expend time and resources in an attempt to obtain a customer without recognizing revenue from that customer to offset such expenditures. Our implementation cycle is also variable, typically ranging from two to four months from contract execution to completion of implementation. Each customer’s situation is different, and unanticipated difficulties and delays may arise as a result of a failure by us or by the customer to meet our respective implementation responsibilities. During the implementation cycle, we expend substantial time, effort, and financial resources implementing our services without recognizing revenue. Even following implementation, there can be no assurance that we will recognize revenue on a timely basis or at all from our efforts. In addition, cancellation of any implementation after it has begun may involve loss to us of time, effort, and expenses invested in the canceled implementation process, and lost opportunity for implementing paying customers in that same period of time.

We may need additional capital to support our operations or the growth of our business, and we cannot be certain that this capital will be available on reasonable terms when required, or at all.

In order for us to grow and successfully execute our business plan, we may require additional financing which may not be available or may not be available on acceptable terms. If such financing is available, it may dilute your ownership of our stock. Failure to obtain financing may have a material adverse effect on our financial position. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support the operation or growth of our business could be significantly impaired and our operating results may be harmed.

If we are required to collect sales and use taxes on the products and services we sell in additional jurisdictions, we may be subject to liability for past sales and incur additional related costs and expenses, and our future sales may decrease.

We may lose sales or incur significant expenses should states be successful in imposing state sales and use taxes on our products and services. A successful assertion by one or more states that we should collect sales or other taxes on the sale of our products and services that we are currently not collecting could result in

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substantial tax liabilities for past sales, decrease our ability to compete with healthcare IT vendors subject to sales and use taxes, and otherwise harm our business. Each state has different rules and regulations governing sales and use taxes, and these rules and regulations are subject to varying interpretations that may change over time. We review these rules and regulations periodically and, when we believe that our products or services are subject to sales and use taxes in a particular state, we voluntarily approach state tax authorities in order to determine how to comply with their rules and regulations. We cannot assure you that we will not be subject to sales and use taxes or related penalties for past sales in states where we believe no compliance is necessary.

Vendors of products and services like us are typically held responsible by taxing authorities for the collection and payment of any applicable sales and similar taxes. If one or more taxing authorities determines that taxes should have, but have not, been paid with respect to our products or services, we may be liable for past taxes in addition to taxes going forward. Liability for past taxes may also include very substantial interest and penalty charges. Nevertheless, customers may be reluctant to pay back taxes and may refuse responsibility for interest or penalties associated with those taxes. If we are required to collect and pay back taxes and the associated interest and penalties, and if our customers fail or refuse to reimburse us for all or a portion of these amounts, we will have incurred unplanned expenses that may be substantial. Moreover, imposition of such taxes on our products and services going forward will effectively increase the cost of those products and services to our customers and may adversely affect our ability to retain existing customers or to gain new customers in the states in which such taxes are imposed.

We may also become subject to tax audits or similar procedures in states where we already pay sales and use taxes. The incurrence of additional accounting and legal costs and related expenses in connection with, and the assessment of, taxes, interest, and penalties as a result of audits, litigation, or otherwise could be materially adverse to our current and future results of operations and financial condition.

If we lose the services of Mahmud Haq or other members of our management team, or if we are unable to attract, hire, integrate and retain other necessary employees, our business would be harmed.

Our future success depends in part on our ability to attract, hire, integrate and retain the members of our management team and other qualified personnel. In particular, we are dependent on the services of Mahmud Haq, our founder, principal stockholder and Chief Executive Officer, who among other things, is instrumental in managing our offshore operations in Pakistan and coordinating those operations with our U.S. activities. The loss of Mr. Haq, who would be particularly difficult to replace, could negatively impact our ability to effectively manage our cost-effective workforce in Pakistan, which enables us to provide our products and solutions at attractive prices. Our future success also depends on the continued contributions of our other executive officers and certain key employees, each of whom may be difficult to replace, and upon our ability to attract and retain additional management personnel. Competition for such personnel is intense, and we compete for qualified personnel with other employers. We may face difficulty identifying and hiring qualified personnel at compensation levels consistent with our existing compensation and salary structure. If we fail to retain our employees, we could incur significant expenses in hiring, integrating and training their replacements, and the quality of our services and our ability to serve our customers could diminish, resulting in a material adverse effect on our business.

We may be unable to adequately establish, protect or enforce our intellectual property rights.

Our success depends in part upon our ability to establish, protect and enforce our intellectual property and other proprietary rights. If we fail to establish, protect or enforce our intellectual property rights, we may lose an important advantage in the market in which we compete. We rely on a combination of patent, trademark, copyright and trade secret law and contractual obligations to protect our key intellectual property rights, all of which provide only limited protection. Our intellectual property rights may not be sufficient to help us maintain our position in the market and our competitive advantages.

We only have one patent pending and none issued, and primarily rely on trade secrets to protect our proprietary technology. Trade secrets may not be protectable if not properly kept confidential. We strive to enter into non-disclosure agreements with our employees, customers, contractors and business partners to limit access to and disclosure of our proprietary information. However, the steps we have taken may not be sufficient to prevent unauthorized use of our technology, and adequate remedies may not be available in the

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event of unauthorized use or disclosure of our trade secrets and proprietary technology. Moreover, others may reverse engineer or independently develop technologies that are competitive to ours or infringe our intellectual property.

Accordingly, despite our efforts, we may be unable to prevent third-parties from using our intellectual property for their competitive advantage. Any such use could have a material adverse effect on our business, results of operations and financial condition. Monitoring unauthorized uses of and enforcing our intellectual property rights can be difficult and costly. Legal intellectual property actions are inherently uncertain and may not be successful, and may require a substantial amount of resources and divert our management’s attention.

Claims by others that we infringe their intellectual property could force us to incur significant costs or revise the way we conduct our business.

Our competitors protect their proprietary rights by means of patents, trade secrets, copyrights, trademarks and other intellectual property. We have not conducted an independent review of patents and other intellectual property issued to third-parties, who may have patents or patent applications relating to our proprietary technology. We may receive letters from third parties alleging, or inquiring about, possible infringement, misappropriation or violation of their intellectual property rights. Any party asserting that we infringe, misappropriate or violate proprietary rights may force us to defend ourselves, and potentially our customers, against the alleged claim. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and/or invalidation of our proprietary rights or interruption or cessation of our operations. Any such claims or lawsuit could:

Furthermore, during the course of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. Disclosure of our confidential information and our involvement in intellectual property litigation could materially adversely affect our business. Some of our competitors may be able to sustain the costs of intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, any litigation could significantly harm our relationships with current and prospective customers. Any of the foregoing could disrupt our business and have a material adverse effect on our business, operating results and financial condition.

Current and future litigation against us could be costly and time-consuming to defend and could result in additional liabilities.

We may from time to time be subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our clients in connection with commercial disputes and employment claims made by our current or former employees. Claims may also be asserted by or on behalf of a variety of other parties, including government agencies, patients of our physician clients, or stockholders. Any litigation involving us may result in substantial costs and may divert management’s attention and resources, which may seriously harm our business, overall financial condition, and operating results. Insurance may not cover existing or future claims, be sufficient to fully compensate us for one or more of such claims, or continue to

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be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby reducing our operating results and leading analysts or potential investors to reduce their expectations of our performance resulting in a reduction in the trading price of our stock.

Our proprietary software may not operate properly, which could damage our reputation, give rise to claims against us, or divert application of our resources from other purposes, any of which could harm our business and operating results.

We may encounter technical obstacles that prevent our proprietary applications from operating properly. If our applications do not function reliably or fail to achieve customer expectations in terms of performance, customers could assert liability claims against us or attempt to cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain customers.

Moreover, information services as complex as those we offer have in the past contained, and may in the future develop or contain, undetected defects or errors. We cannot assure you that material performance problems or defects in our products or services will not arise in the future. Errors may result from receipt, entry, or interpretation of patient information or from interface of our services with legacy systems and data that we did not develop and the function of which is outside of our control. Despite testing, defects or errors may arise in our existing or new software or service processes. Because changes in payer requirements and practices are frequent and sometimes difficult to determine except through trial and error, we are continuously discovering defects and errors in our software and service processes compared against these requirements and practices. These defects and errors and any failure by us to identify and address them could result in loss of revenue or market share, liability to customers or others, failure to achieve market acceptance or expansion, diversion of development resources, injury to our reputation, and increased service and maintenance costs. Defects or errors in our software might discourage existing or potential customers from purchasing our products and services. Correction of defects or errors could prove to be impossible or impracticable. The costs incurred in correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results.

In addition, customers relying on our services to collect, manage, and report clinical, business, and administrative data may have a greater sensitivity to service errors and security vulnerabilities than customers of software products in general. We market and sell services that, among other things, provide information to assist healthcare providers in tracking and treating patients. Any operational delay in or failure of our technology or service processes may result in the disruption of patient care and could cause harm to patients and thereby create unforeseen liabilities for our business.

Our customers or their patients may assert claims against us alleging that they suffered damages due to a defect, error, or other failure of our software or service processes. A product liability claim or errors or omissions claim could subject us to significant legal defense costs and adverse publicity, regardless of the merits or eventual outcome of such a claim.

If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities.

Our services involve the web-based storage and transmission of customers’ proprietary information and patient information, including health, financial, payment and other personal or confidential information. We rely on proprietary and commercially available systems, software, tools and monitoring, as well as other processes, to provide security for processing, transmission and storage of such information. Because of the sensitivity of this information and due to requirements under applicable laws and regulations, the effectiveness of our security efforts is very important. We maintain servers which store customers’ data, including patient health records, in the U.S. and Pakistan. Upon the acquisition of the Target Sellers, we will process, transmit and store some data of our customers on servers and networks that are owned and controlled by third-party contractors and situated in Poland, India and elsewhere. If our security measures are breached or fail as a result of third-party action, acts of terror, social unrest, employee error, malfeasance or for any other reasons, someone may be able to obtain unauthorized access to customer or patient data. Improper activities by third-parties, advances in computer and software capabilities and encryption technology, new tools and

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discoveries and other events or developments may facilitate or result in a compromise or breach of our security systems. Our security measures may not be effective in preventing unauthorized access to the customer and patient data stored on our servers. If a breach of our security occurs, we could face damages for contract breach, penalties for violation of applicable laws or regulations, possible lawsuits by individuals affected by the breach and significant remediation costs and efforts to prevent future occurrences. In addition, whether there is an actual or a perceived breach of our security, the market perception of the effectiveness of our security measures could be harmed and we could lose current or potential customers.

Our products and services are required to meet the interoperability standards, which could require us to incur substantial additional development costs or result in a decrease in sales.

Our customers and the industry leaders enacting regulatory requirements are concerned with and often require that our products and services be interoperable with other third-party healthcare information technology suppliers. Market forces or regulatory authorities could create software interoperability standards that would apply to our solutions, and if our products and services are not consistent with those standards, we could be forced to incur substantial additional development costs. There currently exists a comprehensive set of criteria for the functionality, interoperability and security of various software modules in the healthcare information technology industry. However, those standards are subject to continuous modification and refinement. Achieving and maintaining compliance with industry interoperability standards and related requirements could result in larger than expected software development expenses and administrative expenses in order to conform to these requirements. These standards and specifications, once finalized, will be subject to interpretation by the entities designated to certify such technology. We will incur increased development costs in delivering solutions if we need to change or enhance our products and services to be in compliance with these varying and evolving standards. If our products and services are not consistent with these evolving standards, our market position and sales could be impaired and we may have to invest significantly in changes to our solutions.

We rely on Internet search engines to drive traffic to our website, and if we fail to appear high up in the search results, our traffic would decline and our business would be adversely affected.

We depend in part on Internet search engines, such as Google, Bing, and Yahoo! to drive traffic from potential customers to our website. Although we employ search engine optimization techniques in an effort to increase traffic to our website, our ability to maintain high search result rankings is not entirely within our control. Our competitors’ search engine optimization efforts may result in their websites receiving a higher search result page ranking than ours, or Internet search engines could revise their methodologies in a way that would adversely affect our search result rankings. If Internet search engines modify their search algorithms in ways that are detrimental to us, or if our competitors’ search engine optimization efforts are more successful than ours, growth in our customer base could slow. Our website has experienced fluctuations in search result rankings in the past, and we anticipate similar fluctuations in the future. Any reduction in the number of potential customers directed to our website through search engines could harm our ability to grow our business and increase profitability.

Disruptions in Internet or telecommunication service or damage to our data centers could adversely affect our business by reducing our customers’ confidence in the reliability of our services and products.

Our information technologies and systems are vulnerable to damage or interruption from various causes, including acts of God and other natural disasters, war and acts of terrorism and power losses, computer systems failures, Internet and telecommunications or data network failures, operator error, losses of and corruption of data and similar events. Our customers’ data, including patient health records, reside on our own servers located in the U.S. and Pakistan. In the case of customers of the Target Sellers, such data will reside on, and be transmitted and processed through, third-party servers and networks situated inside and outside the U.S., unless and until such data are migrated to our servers. Although we conduct business continuity planning to protect against fires, floods, other natural disasters and general business interruptions to mitigate the adverse effects of a disruption, relocation or change in operating environment at our data centers, the situations we plan for and the amount of insurance coverage we maintain may not be adequate in any particular case. In addition, the occurrence of any of these events could result in interruptions, delays or cessations in service to

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our customers. Any of these events could impair or prohibit our ability to provide our services, reduce the attractiveness of our services to current or potential customers and adversely impact our financial condition and results of operations.

In addition, despite the implementation of security measures, our infrastructure, data centers, or systems that we interface with or utilize, including the Internet and related systems, may be vulnerable to physical break-ins, hackers, improper employee or contractor access, computer viruses, programming errors, denial-of-service attacks or other attacks by third-parties seeking to disrupt operations or misappropriate information or similar physical or electronic breaches of security. Any of these can cause system failure, including network, software or hardware failure, which can result in service disruptions. As a result, we may be required to expend significant capital and other resources to protect against security breaches and hackers or to alleviate problems caused by such breaches.

We may be subject to liability for the content we provide to our customers and their patients.

We provide content for use by healthcare providers in treating patients. This content includes, among other things, patient education materials, coding and drug databases developed by third-parties, and prepopulated templates providers can use to document visits and record patient health information. If content in the third-party databases we use is incorrect or incomplete, adverse consequences, including death, may occur and give rise to product liability and other claims against us. A court or government agency may take the position that our delivery of health information directly, including through licensed practitioners, or delivery of information by a third-party site that a consumer accesses through our solutions, exposes us to personal injury liability, or other liability for wrongful delivery or handling of healthcare services or erroneous health information. Our liability insurance coverage may not be adequate or continue to be available on acceptable terms, if at all. A claim brought against us that is uninsured or under-insured could harm our business. Even unsuccessful claims could result in substantial costs and diversion of management resources.

We are subject to the effect of payer and provider conduct that we cannot control and that could damage our reputation with customers and result in liability claims that increase our expenses.

We offer electronic claims submission services for which we rely on content from customers, payers, and others. While we have implemented features and safeguards designed to maximize the accuracy and completeness of claims content, these features and safeguards may not be sufficient to prevent inaccurate claims data from being submitted to payers. Should inaccurate claims data be submitted to payers, we may experience poor operational results and be subject to liability claims, which could damage our reputation with customers and result in liability claims that increase our expenses.

Failure by our clients to obtain proper permissions and waivers may result in claims against us or may limit or prevent our use of data, which could harm our business.

Our clients are obligated by applicable law to provide necessary notices and to obtain necessary permission waivers for use and disclosure of the information that we receive. If they do not obtain necessary permissions and waivers, then our use and disclosure of information that we receive from them or on their behalf may be limited or prohibited by state or federal privacy laws or other laws. This could impair our functions, processes, and databases that reflect, contain, or are based upon such data and may prevent use of such data. In addition, this could interfere with or prevent creation or use of rules, and analyses or limit other data-driven activities that benefit us. Moreover, we may be subject to claims or liability for use or disclosure of information by reason of lack of valid notice, permission, or waiver. These claims or liabilities could subject us to unexpected costs and adversely affect our operating results.

Our independent registered public accountants have reported to us that we had a material weakness in our internal control over financial reporting.

In connection with the audit of our financial statements for the years ended December 31, 2012 and 2013, our independent registered public accountants identified deficiencies and in the aggregate a material weakness in our internal control over financial reporting. A “deficiency” in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing

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their assigned functions, to prevent or detect and correct misstatements on a timely basis. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis.

The issues identified by our independent registered public accountants related to the timely and accurate review over our financial closing and reporting process, and resulted in part due to our lack of experienced personnel to perform detailed reviews. We have taken steps to address this issue by hiring an experienced Chief Financial Officer who, among other things, will be responsible for implementing formal procedures and processes to adequately review financial information, formalizing segregation of duties, and upgrading our accounting system to include additional controls. We expect that the reported weakness will be successfully remediated by the end of 2014. Our remediation efforts will include the hiring of additional accounting personnel, upgrading our accounting system with multi-company and multi-currency capabilities, and implementing additional controls. We estimate that the total cost of our remediation efforts during 2014, including the capital cost for our new accounting system and personnel expenses for 12 months, will be between $750,000 and $1.25 million.

Notwithstanding the actions we are taking, we may in the future identify other material weaknesses or significant deficiencies in connection with our internal control over financial reporting. Material weaknesses and significant deficiencies that may be identified in the future will need to be addressed as part of our evaluation of our internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act, which will not apply to us until our second annual report on Form 10-K. Any future disclosures of a material weakness, or errors as a result of a material weakness, could result in a negative reaction in the financial markets and a decrease in the price of our common stock.

Regulatory Risks

The healthcare industry is heavily regulated. Our failure to comply with regulatory requirements could create liability for us, result in adverse publicity and negatively affect our business.

The healthcare industry is heavily regulated and is constantly evolving due to the changing political, legislative, regulatory landscape and other factors. Many healthcare laws, including the Patient Protection and Affordable Care Act (PPACA), that was signed into law in March 2010, are complex, and their application to specific services and relationships may not be clear. In particular, many existing healthcare laws and regulations, when enacted, did not anticipate or address the services that we provide. Further, healthcare laws differ from state to state and it is difficult to ensure that our business, products and services comply with evolving laws in all states. By way of example, certain federal and state laws forbid billing based on referrals between individuals or entities that have various financial, ownership, or other business relationships with healthcare providers. These laws vary widely from state to state, and one of the federal laws governing these relationships, known as the Stark Law, is very complex in its application. Similarly, many states have laws forbidding physicians from practicing medicine in partnership with non-physicians, such as business corporations, as well as laws or regulations forbidding splitting of physician fees with non-physicians or others. Other federal and state laws restrict assignment of claims for reimbursement from government-funded programs, the manner in which business service companies may handle payments for such claims and the methodology under which business services companies may be compensated for such services. Our failure to accurately anticipate the application of these laws and regulations to our business, or any other failure to comply with regulatory requirements, could create liability for us, result in adverse publicity and negatively affect our business.

In addition, federal and state legislatures and agencies periodically consider proposals to revise aspects of the healthcare industry or to revise or create additional statutory and regulatory requirements. For instance, certain computer software products are regulated as medical devices under the Federal Food, Drug, and Cosmetic Act. While the Food and Drug Administration (FDA) has sometimes chosen to disclaim authority to, or to refrain from actively regulating certain software products which are similar to our products, this area of medical device regulation remain in flux. We expect that the FDA will continue to be active in exploring legal regimes for regulating computer software intended for use in healthcare settings. Any additional regulation can be expected to impose additional overhead costs on us and should we fail to adequately meet these legal

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obligations, we could face potential regulation action. Regulatory authorities such as the Centers for Medicare and Medicaid Services (CMS) may also impose functionality standards with regard to electronic prescribing technologies. If implemented, proposals like these could impact our operations, the use of our services and our ability to market new services, or could create unexpected liabilities for us. We cannot predict what changes to laws or regulations might be made in the future or how those changes could affect our business or our operating costs.

If we do not maintain the certification of our EHR solutions pursuant to the HITECH Act, our business, financial condition and results of operations will be adversely affected.

The HITECH Act provides financial incentives for healthcare providers that demonstrate “meaningful use” of EHR and mandates use of health information technology systems that are certified according to technical standards developed under the supervision of the U.S. Department of Health and Human Services (HHS). The HITECH Act also imposes certain requirements upon governmental agencies to use, and requires healthcare providers, health plans, and insurers contracting with such agencies to use, systems that are certified according to such standards. Such standards and implementation specifications that are being developed under the HITECH Act includes named standards, architectures, and software schemes for the authentication and security of individually identifiable health information and the creation of common solutions across disparate entities.

The HITECH Act’s certification requirements affect our business because we have invested and continue to invest in conforming our products and services to these standards. HHS has developed certification programs for electronic health records and health information exchanges. Our web-based EHR solution has been certified as a complete EHR by ICSA Labs, a non- governmental, independent certifying body, which indicates that our EHR solutions meet the 2014 criteria to support Stage 2 “meaningful use” as required by HHS to assist providers in their efforts to meet the goals and objectives of “meaningful use,” making such providers eligible for funding under the HITECH Act if our EHR is used appropriately. However, Stage 2 only refers to the second set of “meaningful use” objectives that must be met to be eligible for incentive payments. Stage 3 requirements have yet to be defined. As the standards are developed, we may need to use additional resources to meet the newly defined requirements, which could lead to delays necessary to modify our solutions. We must ensure that our EHR solutions continue to be certified according to applicable HITECH Act technical standards so that our customers qualify for “meaningful use” incentive payments. Failure to maintain this certification under the HITECH Act could jeopardize our relationships with customers who are relying upon us to provide certified software, and will make our products and services less attractive to customers than the offerings of other EHR vendors who maintain certification of their products.

If a breach of our measures protecting personal data covered by HIPAA or the HITECH Act occurs, we may incur significant liabilities.

The Health Insurance Portability and Accountability Act of 1996, as amended (HIPAA), and the regulations that have been issued under it contain substantial restrictions and requirements with respect to the use, collection, storage and disclosure of individuals’ protected health information. Under HIPAA, covered entities must establish administrative, physical and technical safeguards to protect the confidentiality, integrity and availability of electronic protected health information maintained or transmitted by them or by others on their behalf. In February 2009, HIPAA was amended by the HITECH Act to add provisions that impose certain of HIPAA’s privacy and security requirements directly upon business associates of covered entities. Under HIPAA and the HITECH Act, our customers are covered entities and we are a business associate of our customers as a result of our contractual obligations to perform certain services for those customers. The HITECH Act transferred enforcement authority of the security rule from CMS to the Office for Civil Rights of HHS, thereby consolidating authority over the privacy and security rules under a single office within HHS. Further, HITECH empowered state attorneys general to enforce HIPAA.

The HITECH Act heightened enforcement of privacy and security rules, indicating that the imposition of penalties will be more common in the future and such penalties will be more severe. For example, the HITECH Act requires that the HHS fully investigate all complaints if a preliminary investigation of the facts indicates a possible violation due to “willful neglect” and imposes penalties if such neglect is found. Further, where our liability as a business associate to our customers was previously merely contractual in nature, the

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HITECH Act now treats the breach of duty under an agreement by a business associate to carry the same liability as if the covered entity engaged in the breach. In other words, as a business associate, we are now directly responsible for complying with HIPAA. We may find ourselves subject to increased liability as a possible liable party and we may incur increased costs as we perform our obligations to our customers under our agreements with them.

Finally, regulations also require business associates to notify covered entities, who in turn must notify affected individuals and government authorities of data security breaches involving unsecured protected health information. We have performed an assessment of the potential risks and vulnerabilities to the confidentiality, integrity and availability of electronic health information. In response to this risk analysis, we implemented and maintain physical, technical and administrative safeguards intended to protect all personal data and have processes in place to assist us in complying with applicable laws and regulations regarding the protection of this data and properly responding to any security incidents. If we knowingly breach the HITECH Act’s requirements, we could be exposed to criminal liability. A breach of our safeguards and processes could expose us to civil penalties (up to $1.5 million for identical incidences) and the possibility of civil litigation.

If we or our customers fail to comply with federal and state laws governing submission of false or fraudulent claims to government healthcare programs and financial relationships among healthcare providers, we or our customers may be subject to civil and criminal penalties or loss of eligibility to participate in government healthcare programs.

As a participant in the healthcare industry, our operations and relationships, and those of our customers, are regulated by a number of federal, state and local governmental entities. The impact of these regulations can adversely affect us even though we may not be directly regulated by specific healthcare laws and regulations. We must ensure that our products and services can be used by our customers in a manner that complies with those laws and regulations. Inability of our customers to do so could affect the marketability of our products and services or our compliance with our customer contracts, or even expose us to direct liability under the theory that we had assisted our customers in a violation of healthcare laws or regulations. A number of federal and state laws, including anti-kickback restrictions and laws prohibiting the submission of false or fraudulent claims, apply to healthcare providers and others that make, offer, seek or receive referrals or payments for products or services that may be paid for through any federal or state healthcare program and, in some instances, any private program. These laws are complex and their application to our specific services and relationships may not be clear and may be applied to our business in ways that we do not anticipate. Federal and state regulatory and law enforcement authorities have recently increased enforcement activities with respect to Medicare and Medicaid fraud and abuse regulations and other healthcare reimbursement laws and rules. From time to time, participants in the healthcare industry receive inquiries or subpoenas to produce documents in connection with government investigations. We could be required to expend significant time and resources to comply with these requests, and the attention of our management team could be diverted by these efforts. The occurrence of any of these events could give our customers the right to terminate our contracts with us and result in significant harm to our business and financial condition.

These laws and regulations may change rapidly, and it is frequently unclear how they apply to our business. Any failure of our products or services to comply with these laws and regulations could result in substantial civil or criminal liability and could, among other things, adversely affect demand for our services, invalidate all or portions of some of our contracts with our customers, require us to change or terminate some portions of our business, require us to refund portions of our revenue, cause us to be disqualified from serving customers doing business with government payers, and give our customers the right to terminate our contracts with them, any one of which could have an adverse effect on our business.

Potential healthcare reform and new regulatory requirements placed on our products and services could increase our costs, delay or prevent our introduction of new products or services, and impair the function or value of our existing products and services.

Our products and services may be significantly impacted by healthcare reform initiatives and will be subject to increasing regulatory requirements, either of which could negatively impact our business in a multitude of ways. If substantive healthcare reform or applicable regulatory requirements are adopted, we may have to change or adapt our products and services to comply. Reform or changing regulatory requirements

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may also render our products or services obsolete or may block us from accomplishing our work or from developing new products or services. This may in turn impose additional costs upon us to adapt to the new operating environment or to further develop or modify our products and services. For example, the conversion to the ICD-10-CM standard for coding medical diagnoses will likely cause significant disruption to our industry and consume a large amount of our resources. Such reforms may also make introduction of new products and service more costly or more time-consuming than we currently anticipate. These changes may also prevent our introduction of new products and services or make the continuation or maintenance of our existing products and services unprofitable or impossible.

Additional regulation of the disclosure of medical information outside the United States may adversely affect our operations and may increase our costs.

Federal or state governmental authorities may impose additional data security standards or additional privacy or other restrictions on the collection, use, transmission, and other disclosures of medical information. Legislation has been proposed at various times at both the federal and the state level that would limit, forbid, or regulate the use or transmission of medical information outside of the United States. Such legislation, if adopted, may render our use of our servers in Pakistan for work related to such data impracticable or substantially more expensive. Alternative processing of such information within the United States may involve substantial delay in implementation and increased cost.

Our services present the potential for embezzlement, identity theft, or other similar illegal behavior by our employees.

Among other things, our services from time to time involve handling mail from payers and from patients for our customers, and this mail frequently includes original checks and credit card information and occasionally includes currency. Even in those cases in which we do not handle original documents or mail, our services also involve the use and disclosure of personal and business information that could be used to impersonate third parties or otherwise gain access to their data or funds. The manner in which we store and use certain financial information is governed by various federal and state laws. If any of our employees takes, converts, or misuses such funds, documents, or data, we could be liable for damages, subject to regulatory actions and penalties, and our business reputation could be damaged or destroyed. In addition, we could be perceived to have facilitated or participated in illegal misappropriation of funds, documents, or data and therefore be subject to civil or criminal liability.

Risks Related to this Offering and Ownership of Shares of Our Common Stock

There is no existing market for our common stock and a trading market that will provide you with adequate liquidity may not develop for our common stock.

There is currently no public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market in our common stock, or how liquid that market might be. If an active market does not develop, you may have difficulty selling your shares of our common stock. The initial public offering price of our common stock will be determined by the negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following the completion of this offering.

Our revenues, operating results and cash flows may fluctuate in future periods and we may fail to meet investor expectations, which may cause the price of our common stock to decline.

Variations in our quarterly and year-end operating results are difficult to predict and may fluctuate significantly from period to period. If our sales or operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Specific factors that may cause fluctuations in our operating results include:

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Once our common stock begins trading, the market price of our shares may fluctuate widely, and you could lose all or part of your investment.

We cannot predict the prices at which our common stock may trade after this offering. The market price of our common stock may fluctuate widely, depending upon many factors. These fluctuations could cause you to lose all or part of your investment in our common stock since you might be unable to sell your shares at or above the price you paid in this offering. Factors that could cause fluctuations in the market price of our common stock include the following:

Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.

Future sales of shares of our common stock could depress the market price of our common stock.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. If our stockholders sell, or the market perceives that our stockholders intend to sell, substantial amounts of our common stock in the public market following this offering, the market price of our common stock could decline significantly.

Upon completion of this offering, we will have outstanding [    ] shares of common stock. Of these shares, the shares sold in this offering (except for shares purchased by affiliates), and [    ] additional shares will be freely tradable immediately. The remaining [    ] shares of common stock, including approximately [    ] shares to be issued to the Target Sellers (based on an assumed initial public offering price of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus), are currently restricted as a result of securities laws, escrows or lock-up agreements but will be able to be sold after the offering as described in the section of this prospectus entitled “Shares Eligible For Future Sale.”

In addition, promptly following the completion of this offering, we intend to file a registration statement on Form S-8 registering the issuance of approximately 1,351,000 shares of common stock subject to options or other equity awards issued or reserved for future issuance under our 2014 Equity Incentive Plan. Shares registered under this registration statement on Form S-8 will be available for sale in the public market subject

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to vesting arrangements and exercise of options, the lock-up agreements referred to above and the restrictions of Rule 144 in the case of our affiliates.

You will experience immediate and substantial dilution.

The initial public offering price will be substantially higher than the net tangible book value of each outstanding share of common stock immediately after this offering. If you purchase common stock in this offering, you will suffer immediate and substantial dilution. At the initial public offering price of $10.00, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, with net proceeds of $     million, after deducting estimated underwriting discounts and commissions and estimated offering expenses, investors who purchase shares in this offering will have contributed approximately [    ]% of the total amount of funding we have received to date, but will only hold approximately [    ]% of the total voting rights, giving effect to the issuance of [    ] shares of our common stock upon the closing of the acquisition of the Target Sellers. The dilution will be $[    ] per share in the net tangible book value of the common stock from the assumed initial public offering price. For more information refer to “Dilution.”

Your percentage ownership will be further diluted in the future.

Your percentage ownership will be diluted in the future because of equity awards that we expect will be granted to our directors, officers and employees. Prior to the completion of this offering, our board of directors and stockholders will have approved our 2014 Equity Incentive Plan, which provides for the grant of equity-based awards, including restricted stock, restricted stock units, stock options, stock appreciation rights and other equity-based awards to our directors, officers and other employees, advisors and consultants.

Mahmud Haq will control [    ]% of our outstanding shares of common stock upon completion of this offering, which will prevent new investors from influencing significant corporate decisions.

Upon completion of this offering, Mahmud Haq, our founder and Chief Executive Officer, will beneficially own [    ]% of our outstanding shares of common stock. As a result, Mr. Haq will exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation, and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control of our company or changes in management, and will make the approval of certain transactions difficult or impossible without his support, which in turn could reduce the price of our common stock.

We will have broad discretion in using the proceeds of this offering, and we may not effectively expend the proceeds.

We intend to use approximately $18.2 million of the net proceeds of this offering to fund the cash portion of the purchase price for the Target Sellers, although this amount may increase or decrease by up to 10% based on the actual price at which our common stock is sold in this offering. We expect to use the balance for working capital and general corporate purposes, which may include financing our growth, developing new products and services, and funding capital expenditures, acquisitions and investments. We will have significant flexibility and broad discretion in applying the net proceeds of this offering after paying the cash purchase price for the acquisition of the Target Sellers, and we may not apply these proceeds effectively. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds, and you will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.

Provisions of Delaware law, of our amended and restated charter and amended and restated bylaws may make a takeover more difficult, which could cause our stock price to decline.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and in the Delaware corporate law may make it difficult and expensive for a third party to pursue a tender offer, change in control or takeover attempt, which is opposed by management and the board of directors. Public stockholders who might desire to participate in such a transaction may not have an opportunity to do so. We have a staggered board of directors that makes it difficult for stockholders to change the composition of the

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board of directors in any one year. Further, our amended and restated certificate of incorporation will provide for the removal of a director only for cause and by the affirmative vote of the holders of at least 66 2/3% of the outstanding shares entitled to cast their vote for the election of directors, which may discourage a third party from making a tender offer or otherwise attempting to obtain control of us. These and other anti-takeover provisions could substantially impede the ability of public stockholders to change our management and board of directors. Such provisions may also limit the price that investors might be willing to pay for shares of our common stock in the future.

Any issuance of preferred stock in the future may dilute the rights of our common stockholders.

Our board of directors will have the authority to issue up to 1,000,000 shares of preferred stock and to determine the price, privileges and other terms of these shares. Our board of directors may exercise this authority without any further approval of stockholders. The rights of the holders of common stock may be adversely affected by the rights of future holders of preferred stock.

We do not intend to pay cash dividends on our common stock.

Currently, we do not anticipate paying any cash dividends to holders of our common stock. As a result, capital appreciation, if any, of our common stock will be a stockholder’s sole source of gain.

Complying with the laws and regulations affecting public companies will increase our costs and the demands on management and could harm our operating results.

As a public company and particularly after we cease to be an “emerging growth company,” we will incur significant legal, accounting, and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and the NASDAQ Stock Market impose various requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased and will continue to increase our legal, accounting, and financial compliance costs and have made and will continue to make some activities more time-consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers.

In addition, the Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and the effectiveness of our disclosure controls and procedures quarterly. In particular, beginning with the year ending December 31, 2015, we will need to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, or Section 404. As an “emerging growth company” we will elect to avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act. However, we may no longer avail ourselves of this exemption when we cease to be an “emerging growth company” and, when our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

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Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on internal control from our independent registered public accounting firm.

The JOBS Act allows us to postpone the date by which we must comply with certain laws and regulations and to reduce the amount of information provided in reports filed with the SEC. We cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are and we will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year during which our total annual revenues equal or exceed $1 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt, or (iv) the date on which we are deemed a “large accelerated filer” under the Securities and Exchange Act of 1934, as amended, or the Exchange Act. For so long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, will therefore be subject to the same new or revised accounting standards at the same time as other public companies that are not emerging growth companies.

We cannot predict if investors will find our common stock less attractive because we will rely on some of the exemptions available to us under the JOBS Act. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile. If we avail ourselves of certain exemptions from various reporting requirements, our reduced disclosure may make it more difficult for investors and securities analysts to evaluate us and may result in less investor confidence.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business,” contains forward-looking statements within the meaning of the federal securities laws. These statements relate to anticipated future events, future results of operations or future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “will,” “should,” “intends,” “expects,” “plans,” “goals,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to:

These forward-looking statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties and other factors which 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. The “Risk Factors” section of this prospectus sets forth detailed risks, uncertainties and cautionary statements regarding our business and these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing regulatory environment. 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 contained in this prospectus.

We cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this prospectus. These cautionary statements should be considered with any written or oral forward-looking statements that we may issue in the future. Except as required by applicable law, including the securities laws of the U.S., we do not intend to update any of the forward-looking statements to conform these statements to reflect actual results, later events or circumstances or to reflect the occurrence of unanticipated events. Other than with respect to the acquisition of the Target Sellers, our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or other investments or strategic transactions we may engage in.

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USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of our common stock in this offering will be $     million, based on an assumed initial public offering price of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses. Our net proceeds will increase by approximately $     million if the underwriters’ option to purchase additional shares is exercised in full.

Each $1.00 increase or decrease in the assumed initial public offering price of $10.00 per share would increase or decrease the net proceeds that we receive from this offering by $     million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions. Similarly, each increase or decrease of one million shares in the number of shares of common stock offered by us would increase or decrease the net proceeds that we receive from this offering by $     million, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions.

We intend to use the net proceeds of this offering to fund the cash portion of the purchase price for the Target Sellers in the amount of approximately $18.2 million (assuming an initial public offering price of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus), to pay brokerage fees in the amount of approximately $1.1 million in connection with the acquisition of the Target Sellers, and to pay the legal, accounting and other fees associated with this offering. We will use the remaining proceeds for working capital and other general corporate purposes, including the expansion of our sales and marketing team, and the enhancement of our products and services. In addition, we may also use a portion of the net proceeds for the acquisition of or investment in the businesses or assets of other medical billing companies that we believe are complementary to our present business. Other than with respect to the Target Sellers, we have not entered into any agreement or commitment with respect to any acquisitions or investments at this time.

Other than the cash portion of the purchase price for the Target Sellers and the other items specified above, we have not allocated any specific portion of the net proceeds to any particular purpose, and our management will have the discretion to allocate the proceeds as it determines. Furthermore, the amount and timing of our actual expenditures will depend on numerous factors, including the cash used in or generated by our operations, the pace of the integration of the Target Sellers businesses, the level of our sales and marketing activities and the attractiveness of any additional acquisitions or investments. Pending the use of the proceeds from this offering described above, we plan to invest the net proceeds that we receive in this offering in highly liquid short-term interest-bearing obligations, investment grade investments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

DIVIDEND POLICY

We have never declared or paid cash dividends on our common stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors and will be dependent on a number of factors, including our earnings, capital requirements, our overall financial condition and other factors that our board of directors considers relevant.

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CAPITALIZATION

The following table sets forth our cash and our capitalization as of December 31, 2013:

You should read this information together with the consolidated historical and unaudited pro forma condensed combined financial statements and the related notes thereto included in this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Selected Historical Consolidated Financial Information” sections of this prospectus.

		As of December 31, 2013
		Actual				Pro Forma				Pro Forma As Adjusted
		(in thousands, except share data)
Cash(1)		$	498			$	(17,728	)
Debt, current portion			1,931				1,931
Convertible note payable			472				472				[      ]
Long-term debt, net of convertible note and current portion			1,162				1,162				[      ]
Other long term liabilities			38				38				[      ]
Total debt			3,565				3,565
Stockholders' equity
Common stock, $0.001 par value, authorized 19,000,000 shares, 5,101,770 shares issued and outstanding, actual; authorized [      ] shares, [      ] shares issued and outstanding, pro forma; authorized [      ] shares, [      ] shares issued and outstanding, pro forma as adjusted			5				7
Accumulated other comprehensive loss			(187	)			(187	)
Additional paid-in capital			252				16,745
Retained earnings			49				49
Total stockholders' equity			119				16,614
Total capitalization		$	3,684			$	20,179

As of February 28, 2014, we had $508,000 of cash and $3.6 million of debt, of which $2.0 million is a current liability.

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The outstanding share information in the table above is based on 5,101,770 shares of common stock outstanding as of December 31, 2013, and excludes 217,500 shares of common stock subject to Restricted Stock Unit awards granted after December 31, 2013 and 1,133,500 shares of common stock to be reserved for future issuance under our 2014 Equity Incentive Plan.

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DILUTION

If you invest in our common stock in this offering, your interest will be diluted immediately to the extent of the difference between the initial offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering. Our pro forma net tangible book value as of December 31, 2013 was $     million, or $     per share of common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of shares of common stock outstanding, as of December 31, 2013, after giving effect to the issuance of      shares of our common stock upon the closing of the acquisitions of the Target Sellers, and      shares of our common stock upon conversion of the convertible debt we issued in September 2013, which is expected to occur upon the closing of this offering.

After giving effect to the sale by us of      shares of common stock in this offering at an assumed initial public offering price of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of December 31, 2013 would have been $     million, or $     per share. This amount represents an immediate increase in pro forma net tangible book value of $     per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of approximately $     per share to new investors purchasing shares of common stock in this offering at the assumed initial public offering price. The following table illustrates this dilution:

Assumed initial public offering price per share		$	—
Pro forma net tangible book value per share before this offering			—
Increase in pro forma net tangible book value per share per share attributable to new investors purchasing shares in this offering			—
Pro forma net tangible book value per share to new investors in this offering			—
Dilution in pro forma net tangible book value per share to new investors in this offering		$	—

Each $1.00 increase or decrease in the assumed initial public offering price of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our pro forma adjusted net tangible book value per share to new investors by $     and would increase or decrease, as applicable, dilution per share to new investors in this offering by $    , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions.

If the underwriters exercise their option to purchase additional shares from us in full, the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering would be $     per share, and the dilution in pro forma net tangible book value per share to new investors in this offering would be $     per share.

The following table presents on a pro forma as adjusted basis as of December 31, 2013, after giving effect to the issuance of      shares of our common stock upon the closing of the acquisitions of the Target Sellers, which is expected to occur on the closing of this offering, the differences between existing stockholders and new investors purchasing shares of our common stock in this offering, with respect to the number of shares purchased from us, the total consideration paid or to be paid to us, giving effect to the assumed initial public offering price of $10.00 per share, which is the midpoint of the estimated offering price

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range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses.

		Shares Purchased								Total Consideration								Average Price per Share
		Number				Percent				Amount				Percent
		(in thousands, other than per share data and percentages)
Existing stockholders			5,101,770				74	%		$	256,730				100	%		$	0.05
Holders of convertible note			[      ]				0	%							0	%
Current shareholders of target sellers			1,746,553				26	%							0	%		$	0.00
New investors							0	%							0	%
Total			6,848,323				100	%		$	256,730				100	%

Each $1.00 increase or decrease in the assumed initial public offering price of $10.00 per share would increase or decrease the total consideration paid by new investors and total consideration paid by all stockholders by approximately $     million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions.

If the underwriters exercise their option to purchase additional shares from us in full, our existing stockholders would own   % and our new investors would own   % of the total number of shares of our common stock outstanding upon the completion of this offering.

The outstanding share information in the tables above is based on      shares of our common stock (including shares of common stock to be issued to the Target Sellers upon the closing of this offering and upon conversion of our convertible debt) outstanding as of December 31, 2013, and excludes      shares of common stock subject to RSUs granted after December 31, 2013 and shares of common stock to be reserved for issuance under our 2014 Equity Incentive Plan, to be adopted prior to completion of this offering.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION

The historical consolidated statements of operations data presented below for the years ended December 31, 2012 and 2013 as well as the consolidated balance sheet data as of December 31, 2012 and 2013, are derived from our audited consolidated financial statements included elsewhere in this prospectus. The historical consolidated statements of operations data presented below for the years ended December 31, 2009, 2010 and 2011 as well as the consolidated balance sheet data as of December 31, 2009, 2010 and 2011 are derived from our consolidated financial statements not included in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future, and our interim results are not necessarily indicative of the results that may be expected for the full year or any other period.

The financial information set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the audited and unaudited consolidated historical financial statements and the notes thereto for MTBC included elsewhere in this prospectus.

Consolidated Statements of Operations Data

		Year ended December 31,
		2009				2010				2011				2012				2013
		(in thousands, except per share data)
Net revenue		$	6,501			$	9,229			$	10,089			$	10,017			$	10,473
Operating expenses:
Direct operating costs			2,543				3,914				4,506				4,257				4,273
Selling and marketing			215				202				198				266				249
General and administrative			2,534				3,671				3,832				4,397				4,743
Research and development			244				409				410				396				386
Depreciation and amortization			545				509				546				679				949
Total operating expenses			6,081				8,705				9,492				9,995				10,600
Operating income (loss)			420				524				597				22				(127	)
Interest expense – net			83				25				16				74				136
Other income – net			3				(112	)			133				169				230
Income (loss) before provision (benefit) for income taxes			340				387				714				117				(33	)
Income tax provision			100				140				244				—				145
Net income (loss)		$	240			$	247			$	470			$	117			$	(178	)
Weighted average common shares outstanding
Basic and diluted			5,102				5,102				5,102				5,102				5,102
Net income (loss) per share
Basic and diluted		$	0.05			$	0.05			$	0.09			$	0.02			$	(0.03	)

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Consolidated Balance Sheet Data

		As of December 31,
		2009				2010				2011				2012				2013
		(in thousands)
Cash		$	174			$	302			$	408			$	268			$	498
Working capital (net)(1)			(683	)			(572	)			279				(504	)			(1,620	)
Total assets			2,126				3,537				2,838				3,484				5,773
Long-term debt			399				412				414				330				1,634
Stockholders' equity			(359	)			(109	)			360				406				119

Other Financial Data

		Year ended December 31,
		2009				2010				2011				2012				2013
		(in thousands)
EBITDA(2)		$	968			$	921			$	1,276			$	870			$	1,052

The following table contains a reconciliation of net income (loss) to EBITDA.

Reconciliation of net income (loss) to EBITDA

		Year ended December 31,
		2009				2010				2011				2012				2013
		(in thousands)
Net income (loss)		$	240			$	247			$	470			$	117			$	(178	)
Depreciation			348				322				342				263				234
Amortization			197				187				204				416				715
Interest expense – net			83				25				16				74				136
Income tax provision			100				140				244				—				145
EBITDA		$	968			$	921			$	1,276			$	870			$	1,052

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

We prepared the following unaudited pro forma condensed combined financial statements by applying certain pro forma adjustments to the historical consolidated financial statements of MTBC. The pro forma adjustments give effect to the following transactions (the “Transactions”):

The unaudited pro forma condensed combined statements of operations for the year ended December 31 , 2013 give effect to the Transactions as if each of them had occurred on January 1, 2013. The unaudited pro forma condensed combined balance sheet as of December 31, 2013 gives effect to the Transactions as if each of them had occurred on December 31, 2013.

These pro forma condensed combined financial statements include adjustments for our planned acquisitions because we believe each of these acquisitions is probable under the standards of Rule 3-05 of Regulation S-X. The results of a significant business acquired in 2013 are shown for the period prior to its acquisition by MTBC.

We determined that each acquisition shown involved the acquisition of a business, considering the guidance in Rule 11-01 (d) of Regulation S-X, and individually as well as in aggregate met the significance test of Rule 3-05 of Regulation S-X.

The historical financial statements of MTBC, Metro Medical and each of the businesses whose acquisition is planned appear elsewhere in this prospectus. The financial statements of Metro Medical subsequent to March 31, 2013 are not required to be presented in this prospectus as the acquisition occurred on June 30, 2013, before the end of the reporting period. We have based our historical financial information for Metro Medical for the period of April 1, 2013 through June 30, 2013 on results as reported by its management and reviewed by our accounting and finance department.

We have based the pro forma adjustments upon available information and certain assumptions that we believe are reasonable under the circumstances. We describe in greater detail the assumptions underlying the pro forma adjustments in the accompanying notes, which you should read in conjunction with these unaudited pro forma condensed combined financial statements. In many cases, we based these assumptions on preliminary information and estimates. The actual adjustments to our audited consolidated financial statements will depend upon a number of factors and additional information that will be available on or after the closing date of our initial public offering. Accordingly, the actual adjustments that will appear in our financial statements will differ from these pro forma adjustments, and those differences may be material.

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We account for our completed and proposed acquisitions using the acquisition method of accounting for business combinations under GAAP, with MTBC being considered the acquiring entity. Under the acquisition method of accounting, the total consideration paid is allocated to an acquired company’s tangible and intangible assets, net of liabilities, based on their estimated fair values as of the acquisition date. We have not completed the acquisition of the Target Sellers and therefore the estimated purchase price and fair value of the Target Sellers’ assets to be acquired and liabilities assumed is preliminary. Once we complete our final valuation process, for our planned acquisitions, we may report changes to the value of the assets acquired and liabilities assumed, as well as the amount of goodwill, and those changes could differ materially from what we present here.

We provide these unaudited pro forma condensed combined financial statements for informational purposes only. These unaudited pro forma condensed combined financial statements do not purport to represent what our results of operations or financial condition would have been had the Transactions actually occurred on the assumed dates, nor do they purport to project our results of operations or financial condition for any future period or future date. You should read these unaudited pro forma condensed combined financial statements in conjunction with “Capitalization,” “Selected Historical Consolidated Financial Information” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the historical financial statements, including the related notes thereto, appearing elsewhere in this prospectus.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 2013

		MTBC				Metro Medical 1/1-6/30/13(6)				Adjustments for Revenues Not Acquired(1)				MTBC + Previously Acquired Subtotal				Omni				Practicare				CastleRock				Planned Acquisition Subtotal				Pro Forma Adjustments				Pro Forma Combined
(in thousands, except per share data)
Net revenue		$	10,473			$	1,705			$	(173	)		$	12,005			$	11,292			$	4,861			$	4,925			$	21,078			$	—	(1)		$	33,083
Operating expenses:
Direct operating costs			4,273				1,195				—				5,468				6,077				4,087				1,216				11,380				—				16,848
Selling, general and administrative			4,992				673				—				5,665				4,046				1,119				3,360				8,525				(281	)(2)			13,909
Research and development			386				—				—				386				—				—				—				—				—				386
Depreciation and amortization			949				21				—				970				947				75				177				1,199				7,373	(3)			9,542
Total operating expenses			10,600				1,889				—				12,489				11,070				5,281				4,753				21,104				7,092				40,685
Operating income (loss)			(127	)			(184	)			(173	)			(484	)			222				(420	)			172				(26	)			(7,092	)			(7,602	)
Interest expense – net			136				—				—				136				12				2				47				61				14	(4)			211
Other income – net			230				—				—				230				36				4				—				40				—				270
Income (loss) before provision (benefit) for income taxes			(33	)			(184	)			(173	)			(390	)			246				(418	)			125				(47	)			(7,106	)			(7,543	)
Income tax provision (benefit)			145				(56	)			—				89				2				—				—				2				(2,607	)(5)			(2,516	)
Net income (loss)		$	(178	)		$	(128	)		$	(173	)		$	(479	)		$	244			$	(418	)		$	125			$	(49	)		$	(4,499	)		$	(5,027	)
Weighted average common shares outstanding
Basic and diluted			5,102																																[    ](14)				[    ]
Net loss per share
Basic and diluted		$	(0.03	)																																			[    ]

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of December 31, 2013

		MTBC				Omni				Practicare				CastleRock				Adjustments for Assets Not Acquired				Planned Acquisition Subtotal				Acquisition Related Pro Forma Adjustments				Pro Forma for Acquisitions				IPO Proceeds				Consolidated Pro Forma Results
(in thousands)
Cash		$	498			$	147			$	295			$	662			$	(1,104	)(8)		$	—			$	(18,226)(7)			$	(17,728	)			[   ](13)			$	(17,728	)
Accounts receivable – net			1,009				1,350				577				751				(2,678	)(8)			—				—				1,009							$	1,009
Other current assets			281				31				41				25				—	(8)			97				—				378								378
Current assets			1,788				1,528				913				1,438				(3,782	)			97				(18,226	)			(16,341	)			—				(16,341	)
PP&E – net			505				146				83				13				—	(8)			242				—				747								747
Intangible assets – net			1,535				1,687				—				340				(2,027	)(8)			—				24,874	(9)			26,409								26,409
Goodwill			344				1,690				—				329				(2,019	)(8)			—				9,508	(10)			9,852								9,852
Other LT assets			1,601				23				24				21				(68	)(8)			—				—				1,601								1,601
Total assets		$	5,773			$	5,074			$	1,020			$	2,141			$	(7,896	)		$	339			$	16,156			$	22,268			$	—			$	22,268
Accounts payable			200				391				18				742				(1,151	)(8)			—				—				200								200
Accrued expenses			1,208				—				124								(124	)(8)			—				—				1,208								1,208
Short term debt			1,931				793				67				417				(1,277	)(8)			—				—				1,931								1,931
Deferred revenue			57				—				—				—				—	(8)			—				—				57								57
Other current liabilities			12				—				—				—				—	(8)			—				—				12								12
Total current liabilities			3,408				1,184				209				1,159				(2,552	)			—				—				3,408				—				3,408
Long term debt			1,634				200				—				24				(224	)(8)			—				—				1,634				[   ](11)				1,634
Other LT liabilities			612				—				—				—				—	(8)			—				—				612				[   ](11)				612
Total liabilities			5,654				1,384				209				1,183				(2,776	)			—				—				5,654				—				5,654
Common stock			5				—				539				10				(549	)(12)			—				2	(12)			7				[   ](12)				7
Additional paid-in capital			252				—				—				1,126				(1,126	)(12)			—				16,493	(12)			16,745				[   ](12)				16,745
Retained earnings (defecit)			49				3,690				272				(128	)			(3,834	)(12)			—				—				49								49
Minority interest in subsidiary															(50	)			50	(12)			—				—				—								—
Accumulated other comprehensive loss			(187	)			—				—				—				—	(12)			—				—				(187	)							(187	)
Total shareholders' equity			119				3,690				811				958				(5,459	)			—				16,495				16,614				—				16,614
Total liabilities and equity		$	5,773			$	5,074			$	1,020			$	2,141			$	(8,235	)		$	—			$	16,495			$	22,268			$	—			$	22,268

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

In connection with our planned acquisition of the Target Sellers, we have entered into three asset purchase agreements, which are materially similar, as follows:

FOOTNOTES:

Elimination of Customers not Acquired

		Year ended December 31, 2013
		Metro Medical
		(in thousands)
Revenue of customers not acquired		$	173

Material non-recuring transaction expenses associated with acquisitions

		Year ended December 31, 2013
		(in thousands)
Professional fees incurred by MTBC (legal, accounting, etc.)		$	281

We expect to incur brokerage fees of $1.1 million in connection with our acquisition of the businesses of the Target Sellers, which are not reflected in the pro forma financial statements.

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

The amortization of intangible assets of our planned acquisitions, shown below, assumes that the assets were acquired on January 1, 2013 and amortized over the period associated with each statement of operations.

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Amortization Expense for Planned Acquisitions

		Omni				Practicare				CastleRock				Planned Acquisitions Total Expense
		(in thousands)
For the year ended December 31, 2013
Pro forma		$	5,058			$	1,478			$	1,756			$	8,292
As recorded in historical financial statements of Target Sellers			869				40				170				1,079
Pro forma adjustment		$	4,189			$	1,438			$	1,586			$	7,213

The following table sets forth the amortization expense of Metro Medical, the acquisition completed in 2013, as if it had occurred on January 1, 2013 to arrive at the total pro forma amortization expense for the period associated with each statement of operations. The pro forma amortization for Metro Medical is reduced by the amount of amortization expense already recognized in our historical statements of operations to arrive at the pro forma adjustment.

Amortization Expense for Metro Medical

		Metro Medical
		(in thousands)
For the year ended December 31, 2013
Pro forma		$	385
As recorded in historical financial statements of MTBC			225
Pro forma adjustment		$	160

The following table provides the total adjustment to amortization expense for planned and completed acquisitions for the year ended December 31, 2013:

Total Adjustment to Amortization Expense

		Year ended December 31, 2013
Completed acquisitions		$	160
Planned acquisitions			7,213
Total amortization expense		$	7,373

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In the opinion of the Company it is more likely than not that any tax benefit from a loss in the first year following the acquisition of the Target Sellers would be realized against taxable income generated in future year.

The following table details the pro forma adjustments to income taxes for the year ended December 31, 2013:

Provision for Income Taxes

Year ended December 31, 2013		Metro Medical 1/1-6/30/13				Previously Acquired Subtotal				Omni				Practicare				CastleRock				Planned Acquisition Subtotal				Pro Forma Adjustments				Pro Forma Income (Loss) before Provision (Benefit) for Income Taxes
		(in thousands)
Net income (loss) before income taxes		$	(357	)		$	(357	)		$	246			$	(418	)		$	125			$	(47	)		$	(7,106	)		$	(7,510	)
Estimated provision (benefit) at statutory income tax rate of 34%																															(2,553	)
Less provision (benefit) for income taxes:
Metro Medical																															(56	)
Omni																															2
Practicare																															—
CastleRock																															—
Pro forma tax adjustment																														$	(2,607	)

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The financial results of operations of Metro Medical for the period July 1, 2013 through December 31, 2013 are included in our consolidated financial results for the year ended December 31, 2013.

Metro Medical Prior to Acquisition

		Metro Medical 1/1-3/31/13				Metro Medical 4/1-6/30/13				Metro Medical 1/1-6/30/13
		(in thousands)
Net revenue		$	836			$	869			$	1,705
Operating expenses:
Direct operating costs			546				649				1,195
Selling, general and administrative			314				359				673
Depreciation and amortization			12				9				21
Total operating expenses			872				1,017				1,889
Operating loss			(36	)			(148	)			(184	)
Interest expense – net			—				—				—
Other income – net			—				—				—
Loss before benefit for income taxes			(36	)			(148	)			(184	)
Income tax benefit			(12	)			(44	)			(56	)
Net loss		$	(24	)		$	(104	)		$	(128	)

		Acquisition Cash Consideration
		(in thousands)
Pro forma adjustments to cash:
Omni acquisition		$	(11,125	)
Practicare acquisition			(3,429	)
CastleRock acquisition			(3,672	)
Total net pro forma adjustments to cash		$	(18,226	)

Per the terms of our acquisition agreements, the cash consideration paid to the Target Sellers is to subject adjustment based on the offering price of our shares of common stock in this offering. The exact cash consideration will not be known until closing of this offering and may differ by up to 10% from the amounts shown. If the offering price exceeds the midpoint of the estimated offering price range set forth on the cover page of this prospectus by   %, the acquisition cash consideration will increase by 10%. If the offering price is   % below the midpoint of the estimated offering price range, the acquisition cash consideration will decrease by 10%.

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Assets and Liabilities Not Acquired from Practicare: — We adjusted the unaudited pro forma condensed combined balance sheet to eliminate approximately $896.000 of tangible assets held by Practicare that we do not expect to acquire, and approximately $209,000 in liabilities that we do not expect to assume as part of the acquisition of Practicare’s assets, which will be accomplished by an asset purchase agreement listing specific assets. The asset purchase agreement anticipates the purchase primarily of Practicare’s customer relationships and agreements, as well as fixed assets, unbilled accounts receivable and other tangible assets, but not the purchase of accounts receivable or the assumption of any liabilities.

Assets and Liabilities Not Acquired from CastleRock: — We adjusted the unaudited pro forma condensed combined balance sheet to eliminate approximately $1.4 million of tangible assets held by CastleRock that we do not expect to acquire, and approximately $1.2 million in liabilities that we do not expect to assume as part of the acquisition of CastleRock’s assets, which will be accomplished by an asset purchase agreement listing specific assets. The asset purchase agreement anticipates the purchase primarily of CastleRock’s customer relationships and agreements, as well as fixed assets, unbilled accounts receivable and other tangible assets, but not the purchase of accounts receivable or the assumption of any liabilities.

Pro Forma Adjustments for Assets and Liabilities Not Acquired: — The following schedule summarizes the adjustments to assets and liabilities on the unaudited condensed combined balance sheets, including all adjustments above as well as adjustments to intangibles and goodwill specified below.

Pro Forma Adjustments

		As of December 31, 2013
		Omni				Practicare				CastleRock				Pro Forma Adjustments
		(in thousands)
Cash		$	(147	)		$	(295	)		$	(662	)		$	(1,104	)
Accounts receivable			(1,350	)			(577	)			(751	)			(2,678	)
Other long-term assets			(23	)			(24	)			(21	)			(68	)
Net tangible assets			(1,520	)			(896	)			(1,434	)			(3,850	)
Intangible assets, net			(1,687	)			—				(340	)			(2,027	)
Goodwill			(1,690	)			—				(329	)			(2,019	)
Total assets		$	(4,897	)		$	(896	)		$	(2,103	)		$	(7,896	)
Short term debt			(793	)			(67	)			(417	)			(1,277	)
Other current liabilities			(391	)			(142	)			(742	)			(1,275	)
Long term debt			(200	)			—				(24	)			(224	)
Total liabilities		$	(1,384	)		$	(209	)		$	(1,183	)		$	(2,776	)

The figures set forth below reflect the preliminary fair value of intangible assets of the businesses we plan to acquire, and their estimated useful lives. All preliminary estimates for the fair value of intangibles will be refined once the offering is completed and the final list of customers acquired is known.

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Intangible Assets of Planned Acquisitions

		Omni				Practicare				CastleRock				Total Planned Acquisitions				Estimated Useful Life
		(in thousands)
Customer relationships		$	12,917			$	3,674			$	4,448			$	21,039				3 years
Non-compete agreements			2,257				759				819				3,835				3 years
Total intangible assets		$	15,174			$	4,433			$	5,267			$	24,874

The value of intangible assets includes $2.0 million of intangible assets recorded on the balance sheets of the businesses we plan to acquire.

The amounts set forth below reflect the estimated acquisition-date fair value of intangible assets for our acquisition of Metro Medical. These intangible assets are already included in our historical consolidated balance sheet as of December 31, 2013.

Intangible Assets of Acquired Business

		Metro Medical				Estimated Useful Life
		(in thousands)
Customer relationships		$	904				3 years
Non-compete agreements			252				3 years
Total intangible assets		$	1,156

For accounting purposes, we use an estimated useful life of three years to amortize these intangible assets, attributing the value of the purchased relationship to the first three years and attributing future customer life to the services provided by the Company.

We engaged a third-party valuation specialist to assist us in valuing the assets acquired and liabilities assumed via the Metro Medical acquisition. We did not acquire tangible assets in the acquisition of Metro Medical. The valuation of the business acquired and the results of its operations are included in our historical financial statements from the date of the acquisition.

For our three planned acquisitions, management has made an initial fair value estimate of the assets acquired and liabilities assumed as of December 31, 2013. These initial estimates will likely differ from the final valuation, once we have consummated the acquisitions and received the valuation report of a third-party specialist; and this difference could be material.

The asset purchase agreements for these acquisitions include the purchase of certain tangible assets and assumption of certain liabilities. We believe that due to the short-term nature of many of the assets acquired that their carrying values, as included in the historical financial statements of the entities, approximate their respective fair values. The acquired goodwill for these acquisitions is primarily related to synergies with our combined businesses and assembled workforce.

A portion of the purchase price for each Target Seller has been allocated to goodwill, even though the purchase price of companies acquired in the past, other than Metro Medical, has been fully allocated to the value of customer relationships and contracts and non-compete agreements with the sellers. The factors which drove our valuation models to allocate a portion of the price to goodwill in the acquisitions of the Target Sellers include the following: (i) the Target Sellers are being purchased at higher multiples to their trailing revenues, and (ii) more employees of each Target Seller will be retained following the acquisitions as compared to acquisitions completed in prior years.

The following table shows the preliminary purchase price, estimated acquisition-date fair values of the to-be-acquired assets and liabilities assumed, non-controlling interest and calculation of goodwill for the businesses we plan to acquire, as of December 31, 2013, the date of our most recent balance sheet. The value of goodwill includes $2.0 million of goodwill recorded on the balance sheets of the businesses we plan to acquire.

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Purchase Price Allocation

		Omni				Practicare				CastleRock				Total Planned Acquisitions
		(in thousands)
Cash consideration		$	11,125			$	3,429			$	3,672			$	18,226
Common stock			11,125				2,805				3,572				17,502
Fair value adjustment			(223	)			(748	)			(36	)			(1,007	)
Net common stock			10,902				2,057				3,536				16,495
Total Purchase Price		$	22,027			$	5,486			$	7,208			$	34,721
Net tangible assets acquired			177				124				38				339
Intangible assets			15,174				4,433				5,267				24,874
Goodwill			6,676				929				1,903				9,508
Total purchase price allocation		$	22,027			$	5,486			$	7,208			$	34,721

The fair value of the shares of our common stock that we plan to issue in connection with our three planned acquisitions is anticipated to be approximately $16.5 million. The purchase prices are based on the actual revenues of the companies in the four quarters ending December 31, 2013, calculated on an assumed initial public offering price of $10.00 per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus. Pursuant to the terms of the respective purchase agreements, the purchase price we will pay for each of the Target Sellers will be calculated as a multiple of revenue generated by such Target Seller in the most recent four quarters included in this prospectus from its customers that are in good standing as of the closing date. The fair value adjustment shown above is based on our estimate of revenues at the time of acquisition and our estimate of customer retention rates, which drive the contingent portion of the purchase price, as discussed further below.

The preliminary estimate of equity consideration to be transferred is based on an aggregate value of equity, as stated in the asset purchase agreements, at the price of our common stock to be sold in this offering. The number of shares that will be issued in connection with those acquisitions will be fixed shortly before closing of this offering. For purposes of determining the number of shares to be issued to each Target Sellers, a “Target Share Price” of $10 per share will be utilized, which assumes a valuation in the offering equal to three times the aggregate revenues over the preceding four quarters included in this prospectus. The total equity value for each acquisition will be determined at the time of closing, based on the fixed number of shares and the actual offering price. The cash consideration paid to the Target Sellers will then be increased or decreased by up to 10%, to the extent the actual offering price is greater or less than the Target Share Price.

The amount of goodwill on the date of the acquisition will therefore vary based on the actual price of the offering, since it will impact the value of the shares as well as the amount of cash. If the offering price exceeds the midpoint of the estimated offering price range set forth on the cover page of this prospectus by    %, the total purchase price will increase by 10%, and the entire increase will be allocated to goodwill. If the offering price is    % below the midpoint of the estimated offering price range, the total purchase price will decrease by 10%, and such decrease will reduce goodwill by the same amount.

For the Target Sellers, management has made an initial estimate that $9.5 million of goodwill will result from those planned acquisitions. We believe that this amount will be deductible for tax purposes over a period of 15 years. However, these estimates are preliminary, and we have not completed the required tax and legal analyses to finalize our determination of deductibility of goodwill for tax purposes. Accordingly, the values of the goodwill recognized from these planned acquisitions and their deductibility for tax purposes set forth in these unaudited pro forma condensed combined financial statements could change and those changes could differ materially from what we present here.

For each Target Seller, we have assumed that revenue from existing customers will be 5% less in the 12 months following closing as compared to the 12 months preceding the closing. This assumption is based on management’s estimate that we will be able to retain customers producing 90% of the revenue of each Target Seller for at least one year following the closing, with customer losses and resulting revenue losses spread evenly over the 12 months following closing.At the time each acquisition is consummated, further analysis of each customer base will be undertaken, and the fair value of the common stock to be issued may be greater or lesser than the amount shown.

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In addition, each purchase agreement provides us with the right to cancel a portion of the shares issued to the Target Seller held in escrow in the event revenues from such Target Seller’s customers in the 12 months following the closing are below a specified threshold.In certain situations we also have the obligation to increase the number of shares issued to Target Sellers in the event revenues from the customers of the Target Seller in the 12 months following the closing exceed a specified target. The purchase price adjustment is considered a form of contingent consideration. This contingent consideration arrangement is an equity instrument and it is measured at fair value on the acquisition date and not subsequently remeasured.Any differences between the shares estimated to be issued at acquisition date and shares ultimately issued is accounted for within equity (not reducing the purchase price).

Adjustments to Equity

		Common Stock				Additional Paid-in Capital				Accumulated Equity/ Deficit				Minority Interest in Subsidiary				Accumulated Other Comprehensive Income				Total Equity
		(in thousands)
Omni		$	—			$	—			$	(3,690	)		$	—			$	—			$	(3,690	)
Practicare			(539	)			—				(272	)			—				—				(811	)
CastleRock			(10	)			(1,126	)			128				50				—				(958	)
Adjustments to equity		$	(549	)		$	(1,126	)		$	(3,834	)		$	50			$	—			$	(5,459	)
Equity issued in connection with acquisitions			2				17,500				—				—				—				17,502
Less: fair value adjustment							(1,007	)															(1,007	)
Acquisition adjustments to equity		$	2			$	16,493			$	—			$	—			$	—			$	16,495
Equity issued in initial public offering			[    ]				[    ]																[    ]

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Weighted average shares outstanding

		Common Shares
		December 31, 2013
		(in thousands)
Weighted average shares outstanding			5,102
Acquisitions
Shares issued for Omni			1,112.500
Shares issued for Practicare			280.524
Shares issued for CastleRock			357.225
Shares issued in initial public offering			—
Shares issued from convertible note			58
Total pro forma weighted average shares outstanding			6,911

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Supplemental Information.

For Metro Medical and each of the Target Sellers, we have identified revenue from customers who cancelled their contracts prior to MTBC’s acquisition (or anticipated acquisition) of such customers’ contracts. Such revenue is included in the pro forma condensed consolidated financial statements, even though MTBC will not generate revenues from those customers. Pursuant to the terms of the respective purchase agreements, the purchase price we will pay for each of the Target Sellers will be calculated as a multiple of revenue generated by such Target Seller in the most recent four quarters included in this prospectus from its customers that are in good standing as of the closing date.The amount of revenue we have indicated below is based on reports provided, and representations made, by management of the Target Sellers, and we have used the estimates below to compute anticipated acquisition prices for each of the Target Sellers. Actual amounts may differ significantly from the amounts shown based on the date on which the closing occurs and the customers of the Target Sellers that are in good standing at that time.

Estimated revenue from customers who have cancelled prior to our acquisition

		Metro Medical				Omni				Practicare				CastleRock
		(in thousands)
Year ended December 31, 2013		$	78			$	435			$	705			$	162

To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and decision-making surrounding pro forma operations, we supplement our consolidated financial statements presented on a basis consistent with U.S. generally accepted accounting principles, or GAAP, with EBITDA, a non-GAAP financial measure of earnings. EBITDA represents net income before income tax expense (benefit), interest income, interest expense, depreciation and amortization. Our management uses EBITDA as a financial measure to evaluate the profitability and efficiency of our business model. We use this non-GAAP financial measure to assess the strength of the underlying operations of our business. These adjustments, and the non-GAAP financial measure that is derived from them, provide supplemental information to analyze our operations between periods and over time. We find this especially useful when reviewing pro forma results of operations which include large non-cash amortization of intangibles assets from acquisitions. Investors should consider our non-GAAP financial measure in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

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The following tables contain a reconciliation of net income (loss) to EBITDA

Reconciliation of net income (loss) for the year ended
December 31, 2013 to EBITDA

		MTBC				Metro Medical 1/1-6/30/13				MTBC + Previously Acquired Subtotal				Omni				Practicare				CastleRock				Planned Acquisition Subtotal				Pro Forma Adjustments				Pro Forma Combined
		(in $ thousands)
Net income (loss)		$	(178	)		$	(301	)		$	(479	)		$	244			$	(418	)		$	125			$	(49	)		$	(4,499	)		$	(5,027)
Depreciation			234				21				255				78				35				7				120				—				375
Amortization			715				—				715				869				40				170				1,079				7,373				9,167
Interest expense –  net			136				—				136				12				2				47				61				14				211
Income tax provision (benefit)			145				(56	)			89				2				—				—				2				(2,607	)			(2,516	)
EBITDA		$	1,052			$	(336	)		$	716			$	1,205			$	(341	)		$	349			$	1,213			$	281			$	2,210

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the “Selected Historical Consolidated Financial Information” and the “Pro Forma Condensed Combined Financial Information” and the consolidated historical and pro forma financial statements and the related notes thereto included in this prospectus. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’s expectations. Factors that could cause such differences are discussed in “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” We assume no obligation to update any of these forward-looking statements.

Overview

MTBC is a healthcare information technology company that provides a fully integrated suite of proprietary web-based solutions, together with related business services, to healthcare providers practicing in ambulatory settings. Our integrated Software-as-a-Service (or SaaS) platform is designed to help our customers increase revenues, streamline workflows and make better business and clinical decisions, while reducing administrative burdens and operating costs. We employ a highly educated workforce of more than 1,000 people in Pakistan, where we believe labor costs are approximately one-half the cost of comparable India-based employees, thus enabling us to deliver our solutions at competitive prices.

Our flagship offering, PracticePro, empowers healthcare practices with the core software and business services, on one unified SaaS platform, to efficiently operate their businesses, manage clinical workflows and receive timely payment for their services. PracticePro consists of:

Adoption of our solutions requires only a modest upfront expenditure by a provider. Additionally, our financial performance is linked directly to the financial performance of our clients because the vast majority of our revenues is based on a percentage of our clients' collections. The standard fee for our complete, integrated, end-to-end solution is 5% of a practice’s healthcare-related revenues plus a one-time setup fee, and is among the lowest in the industry.

Our growth strategy involves two approaches: acquiring smaller RCM companies and then migrating the customers of those companies to our solutions, as well as partnering with EHR and other vendors that lack an integrated solution and integrating our solutions with their offerings. The RCM service industry is highly fragmented, with many local and regional RCM companies serving small medical practices. We believe that the industry is ripe for consolidation and that we can achieve significant growth through acquisitions. We further believe that it is becoming increasingly difficult for traditional RCM companies to meet the growing technology and business service needs of healthcare providers without a significant investment in information technology infrastructure.

We believe we will also be able to accelerate organic growth by partnering with leading industry participants, utilizing them as channel partners to offer integrated solutions to their customers. We have recently entered into arrangements with industry participants from which we expect to begin to derive revenue starting in the mid 2014, including emerging EHR providers and other healthcare vendors that lack a full suite of solutions. We are in the midst of developing application interfaces with two EHR systems as well as a provider of paper-based clinical forms to create integrated offerings.

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Our Pakistan operations accounted for approximately 51% of total expenses in 2012 and 48% of those expenses in 2013. A significant portion of those expenses were personnel-related costs (approximately 73% in 2012 as well as in 2013). Because personnel-related costs are significantly lower in Pakistan than in the U.S. and many other offshore locations, we believe our Pakistan operations give us a competitive advantage over many industry participants. All of the medical billing companies that we acquire, including the Target Sellers, use domestic labor or labor from higher cost locations to provide all or a substantial portion of their services. We are able to achieve significant cost reductions as we shift these domestic labor costs to Pakistan.

As of December 31, 2013, approximately 30% of our practices were obtained through strategic transactions with regional RCM companies (before giving effect to the acquisition of the Target Sellers). Since 2006, we have acquired eight RCM companies and entered into outsourcing agreements with two additional RCM companies under which we service all of their customers. During 2012 alone, we acquired four RCM companies, and successfully migrated a majority of the customers of those companies from eight distinct RCM platforms to PracticePro within 120 days of closing. We have been most successful in retaining customers of acquired companies when we have been able to migrate those customers to PracticePro. By migrating acquired customers to PracticePro, we are able to reduce our costs and provide better service, which generally results in increased customer satisfaction and retention rates.

Our prior acquisitions were financed by the respective sellers, with the purchase price being paid over time following the closing of each acquisition, in most instances, pursuant to an unsecured promissory note. In these transactions, we utilized the cash flow generated from the acquired customer accounts as the primary means of satisfying our post-closing payment obligations to the sellers. In addition, with the exception of our most recent acquisition of Metro Medical, the purchase price for our acquisitions was subject to a post-closing reduction based on customer retention. Under these agreements, if customers failed to remain with MTBC beyond a certain period of time, typically one year after the closing, the purchase price would be proportionally decreased based upon the portion of the purchase price allocated to such customer.

During 2012, we acquired four revenue cycle management companies. The relatively small size of these companies (each with less than one million dollars in annual revenues), posed a challenge inasmuch as retaining employees was not practical due to the size of these companies. In addition, many of the customer relationships of the acquired companies were severely strained prior to our involvement. Nevertheless, one year after the respective closings, the average quarterly revenue generated from the customers acquired in our 2012 acquisitions was 85% of the quarterly revenue generated from these customers in the quarter preceding the respective acquisitions.

Most recently, we acquired approximately 85% of the revenue and 93% of the customers of Metro Medical at the close of business on June 30, 2013 for a purchase price of $1.5 million, of which $275,000 was paid in cash at closing with the balance to be paid in 24 monthly installments with the final installment to be paid on August 1, 2015. Based in New York City, Metro Medical provides RCM services to physicians in New York and New Jersey and generated revenues of approximately $3.3 million in 2012, of which approximately $2.7 million represented revenues from the customers we acquired. As of December 31, 2013, we served approximately 177 providers we acquired from Metro Medical, representing 90 practices in various specialties, including dermatology and internal medicine. We successfully migrated 74% of the acquired customers to PracticePro within 180 days of closing, and retained 88% of acquired customers as of December 31, 2013, 180 days after the closing.

Upon the closing of our acquisition of the Target Sellers, we will acquire three additional RCM companies, which as of December 31, 2013 served approximately 1,000 providers, representing approximately 500 practices, practicing in over 20 specialties and subspecialties, across 23 states. We intend to continue to pursue strategic acquisitions that we believe will deliver growth in our revenues and profitability and allow us to take advantage of greater economies of scale.

Each acquisition with the Target Sellers has been structured as an asset purchase pursuant to an acquisition agreement that allows us to decrease or increase the share consideration paid to each Target Seller. This adjustment to the share consideration received by each Target Seller is based on the revenues generated from the acquired customers in the 12 months following the closing, as compared to the revenues generated by the Target Seller in the 12 months prior to the closing (or in Omni’s case, in the 12 months prior to the

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execution of the purchase agreement). For each of Omni, Practicare, and CastleRock, no adjustment will be made unless the variance in post-closing revenues is greater than 10%, 5% and 20%, respectively. In each case, the adjustment will either result in additional shares being issued by us to the Target Seller, or the cancellation of shares then held in escrow. No change in the cash consideration will be effected as a result of these adjustments.

Historical Perspective

Although we show pro forma net losses for 2013 giving effect to the acquisition of the Target Sellers, such losses are attributable in part to non-cash expenses for the amortization of intangible assets associated with acquisitions of the Target Sellers. However, on a pro forma basis for this period, EBITDA, which is used by our management as a financial measure to evaluate the profitability and efficiency of our business model, and cash flow from operations, were both positive.

Since our formation in 2001, we have developed our proprietary technology solution, hired 1,000 employees and built redundant facilities in two locations in Pakistan with minimal outside financing. Our success has been achieved by a combination of cost-efficient strategies and revenue growth through acquisitions. Several acquisitions and two outsourcing arrangements were completed with our knowledge that certain customers may terminate soon after acquisition, and in some cases, some customers had already given notice of termination to the companies. However, we structure acquisitions to provide us with a degree of protection against customer loss by means of a post-closing reduction to the purchase price one year following these acquisitions based on customers retained during that period. In two cases, we determined that it was less risky to simply create an outsourcing arrangement, paying referral fees to a troubled company for customers of theirs that we serviced, instead of acquiring their existing customer contracts.

Because many of our acquisitions were completed when we had less resources, the companies whose assets we acquired were often unable to serve the needs of their customers, and we recognized that customer retention would be challenging. However, we negotiated low purchase prices and mechanisms to shift much of the retention risk to the sellers. These transactions allowed us to generate marginal revenues well in excess of marginal costs by utilizing our technology and shifting work to our offshore operations, and allowed us to refine our processes for integrating customers from acquisitions.

Out of eight acquisitions, our purchase of Medical Accounting Billing Company (or MABCO) in February 2010 for $455,000 was the only one that did not perform as expected. Upon the closing of this transaction, most of MABCO’s employees were terminated, as we transitioned customer support and related services to our offshore offices. The MABCO operations and relationship manager we retained was responsible for customer relations and the transitioning of customers to our solution, but suffered an illness soon after closing, becoming incapable of effectively guiding the accounts through the transition. As a result, we eventually lost all of MABCO’s customers and were required to write-off intangible assets in the amount $126,000 in 2012. Notwithstanding this outcome, we were able to generate revenues from MABCO customers of $787,000 in 2010, $460,000 in 2011 and $86,000 in 2012, and due in part to the downward adjustment to the purchase price for this acquisition, we had net positive cash flow attributable to this transaction in the first two years following its closing and over the life of the arrangement.

The two outsourcing arrangements we entered into allowed us to scale our operations more quickly than we could have otherwise done, and resulted in a positive return on our investment, even though they did not provide sustained long-term revenue. For example, in September 2010, we entered into an outsourcing agreement with Medi/Tab, agreeing to pay 34% of revenue received from Medi/Tab’s clients for three years, knowing that Medi/Tab’s largest client, which generated $500,000 of quarterly revenue, had provided notice of termination to Medi/Tab prior to our arrangement. In addition, we were aware that Medi/Tab’s second largest customer, which generated $250,000 of quarterly revenue, was considering terminating its contract with Medi/Tab. However, we were able to help Medi/Tab enforce its contractual termination provisions and generate revenue from the largest customer for six months, and we were able to retain the second largest client for two years. These two customers accounted for $1.6 million of revenue in 2011, $624,000 in 2012 and $17,000 in 2013. While this transaction did not produce significant long-term revenues, it allowed us to reach $10 million in annual revenue by 2011 and resulted in net positive cash flows to us over the life of the arrangement.

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Acquisition Strategy and Challenges

Our strategy to become a leading provider of integrated, end-to-end software and business service solutions to healthcare providers practicing in an ambulatory setting is based on our ability to acquire smaller RCM companies as well as generating organic growth. We believe that the RCM market is ripe for consolidation and that our complete end-to-end software and services infrastructure gives our company a unique advantage in this industry consolidation. However, we may experience challenges in implementing our acquisition strategy, including lack of customer demand for our products and services, inability to attract smaller RCM companies for acquisition and failure to integrate acquired customers into our infrastructure. Accordingly, we will draw on our previous experience in operating in the competitive RCM market and integrating acquisitions into our solution in order to successfully manage the challenges we may face.

We believe we can achieve significant cost-savings by merging the operations of the Target Sellers with our after their acquisition, and leveraging our technology and offshore operation in Pakistan, with labor costs that are significantly lower than the Target Sellers’ costs in the U.S. In the past, we have reduced operating costs by terminating employment of the majority of the employees of the acquired companies, terminating or not assuming real property leases, and to the extent necessary, instead utilizing low cost employees based in Pakistan. These actions are generally taken at closing or within one year thereafter. As a result, we believe that an analysis of the historical costs and expenses of the Target Sellers prior to their acquisition will not provide guidance as to the anticipated results after acquisition. We anticipate that we will be able to achieve significant reductions in direct operating costs and selling, general and administrative expenses from the levels incurred by the Target Sellers operating independently, thereby increasing our EBITDA and cash flows.

The key component to each of the Target Seller acquisitions is integrating the acquired clients into our existing infrastructure. To this end, we plan on implementing the strategies and processes learned from both our successes and challenges in prior acquisitions. In particular, our goal is to carefully shift the existing workflow of the Target Sellers’ to our software platform and operational infrastructure located in Pakistan within a period of one year following the closing of this offering. Our experience in previous acquisitions has demonstrated to us the need to carefully analyze the individual needs of each acquired customer when deciding how best to transition their workflow to our operations while minimizing disruptions to their practices.

Following our past acquisitions, some acquired customers terminated their relationships with us. These terminations occurred for a variety of reasons, including because of our transition of workflow from local employees previously assigned to their account to our offshore team members; actual or perceived disruptions to customers’ businesses; our migration of customers from their existing practice management software platform to our solution; and the exacerbation of the strain that already existed in some of the customers’ relationships with the acquired companies. We will seek to address the challenges we have experienced in prior acquisitions by working more closely with acquired customers in the future to understand which combination of software and services is best for their practice. To that end, we plan on retaining a larger portion of the Target Sellers’ existing workforce for a longer period of time than in previous acquisitions, as well as developing integrations with existing software solutions to ensure customer satisfaction and retention.

Due to the competitive and often uncertain nature of our industry, we will also face challenges in our effort to become the leading provider of integrated end to end software and business service solutions to healthcare providers practicing in an ambulatory setting. These challenges may include our inability to provide effective software and RCM solutions to our clients; our competitor’s development of more efficient software and processes; the rising cost of labor, both onshore and offshore, causing us to scale back operations and thus decreasing the level of our customer service; our inability to attract and integrate compatible acquisition targets; and the lack of demand for our products and services despite the increase in our marketing efforts.

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Case Study: Metro Medical Acquisition

Our most recent acquisition of Metro Medical’s customers on June 30, 2013 represents our best model of integration to date. It was larger than prior acquisitions and closer in size to the Target Sellers. Because we retained more employees for a longer period of time, transitions went more smoothly.

The graphs below illustrate the improvement in operational performance we were able to achieve following our acquisition of Metro Medical due to the use of our technology and low-cost offshore workforce. Q1 and Q2 of 2013 are prior to the acquisition; Q3 and Q4 are subsequent.

We consider contribution margin to be an effective performance measure with respect to discrete groups of customers, including customers obtained from an acquisition.

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The following table reflects the calculation of contribution margin from customers we acquired from Metro Medical for each of the periods indicated:

Metro Medical

		Q1-Q2 2013				Q3 2013				Q4 2013
		(in thousands)
Net revenue		$	727			$	782			$	755
Operating expenses:
Direct operating costs			513				394				271
Selling, general and administrative			295				211				116
Total direct operating expenses			808				605				387
Contribution margin			(81	)			177				368
			-11	%			23	%			49	%