11. COMMITMENTS AND CONTINGENCIES

Legal Proceedings — On December 9, 2022, an arbitrator rendered a decision in favor of MTBC Acquisition Corp. (“MAC”) and dismissed the claims brought against MAC by Randolph Pain Relief and Wellness Center (“RPRWC”), determining that RPRWC failed to prove any breach of the applicable billing services agreement and failed to prove that any alleged damages were due. RPRWC has until April 5, 2023 to file a summary action in Superior Court of New Jersey should it seek to have the decision overturned.

RPRWC was a client of Millennium Practice Management Associates, Inc. (“MPMA”), a subsidiary of MediGain, Inc., whose assets were purchased by MAC on October 3, 2016, after RPRWC terminated its billing services agreement with MPMA. After MAC’s purchase of MediGain’s assets, RPRWC demanded an arbitration proceeding against CareCloud and MAC before the American Arbitration Association for damages they alleged were caused by MPMA prior to the asset purchase.

On May 30, 2018, the Superior Court of New Jersey, Chancery Division, Somerset County (the “Chancery Court”) denied CareCloud’s and MAC’s request to enjoin the arbitration proceeding demanded by RPRWC.

CareCloud and MAC filed an appeal of the Chancery Court’s decision with the New Jersey Superior Court, Appellate Division. The Chancery Court stayed the arbitration pending the appeal. On appeal, CareCloud and MAC contended they were never party to the billing services agreement giving rise to the arbitration claim, did not assume the obligations of MPMA under such agreement, and any agreement to arbitrate disputes arising under such agreement did not apply to CareCloud or MAC as RPRWC terminated the agreement before the applicable asset purchase agreement took effect.

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

On February 6, 2020, the Chancery Court held that CareCloud cannot be compelled to participate in the arbitration. On March 25, 2020, the Chancery Court lifted the stay of arbitration relative to RPRWC and MAC. In its arbitration demand, RPRWC alleged that MPMA, a subsidiary of MediGain, LLC, breached the terms of the billing services agreement the parties had entered into and sought compensatory damages of $6.6 million and costs.

During the discovery phase of the arbitration, RPRWC served expert reports whereby RPRWC’s expert alleged that damages were estimated to be in the range of $9.8 million to $10.8 million. MAC served an expert report refuting the alleged damages.

In the event RPRWC files a summary action, MAC will continue to vigorously defend against RPRWC’s claim. It remains that since MAC is not a significant subsidiary of CareCloud pursuant to Rule 1-02(w) of Regulation S-X and CareCloud is not a party to this proceeding, we do not expect any outcome to have a material impact on the Company’s consolidated financial statements.

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