0001493152-17-012483.txt : 20171106 0001493152-17-012483.hdr.sgml : 20171106 20171106163142 ACCESSION NUMBER: 0001493152-17-012483 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 67 CONFORMED PERIOD OF REPORT: 20170930 FILED AS OF DATE: 20171106 DATE AS OF CHANGE: 20171106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEDICAL TRANSCRIPTION BILLING, CORP CENTRAL INDEX KEY: 0001582982 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 223832302 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36529 FILM NUMBER: 171179799 BUSINESS ADDRESS: STREET 1: 7 CLYDE ROAD STREET 2: SOMERSET CITY: SOMERSET STATE: NJ ZIP: 08873 BUSINESS PHONE: 7328735133 MAIL ADDRESS: STREET 1: 7 CLYDE ROAD STREET 2: SOMERSET CITY: SOMERSET STATE: NJ ZIP: 08873 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark one)

 

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

 

For the quarterly period ended September 30, 2017

 

or

 

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

 

For the transition period from                 to

 

Commission File Number 001-36529

 

MEDICAL TRANSCRIPTION BILLING, CORP.

(Exact name of registrant as specified in its charter)

 

Delaware   22-3832302

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

7 Clyde Road

Somerset, New Jersey

 

 

08873

(Address of principal executive offices)   (Zip Code)

 

(732) 873-5133

(Registrant’s telephone number, including area code)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

 

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 [   ]   Accelerated filer [   ]
Non-Accelerated filer [  ]  (Do not check if a smaller reporting company) Smaller reporting company [X]
    Emerging growth company [X]

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. [X]

 

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

 

At November 1, 2017, the registrant had 11,530,591 shares of common stock, par value $0.001 per share, outstanding.

 

 

 

 
 

 

INDEX

 

  Page
   
Forward Looking Statements 2
   
PART I. FINANCIAL INFORMATION

     
Item 1. Condensed Consolidated Financial Statements (unaudited)
  Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016 3
  Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016 4
  Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2017 and 2016 5
  Condensed Consolidated Statement of Shareholders’ Equity for the nine months ended September 30, 2017 6
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 7
  Notes to Condensed Consolidated Financial Statements 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 29
Item 4. Controls and Procedures 29
     
  PART II. OTHER INFORMATION
     
Item 1. Legal Proceedings 31
Item 1A. Risk Factors 31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 31
Item 3. Defaults Upon Senior Securities 31
Item 4. Mine Safety Disclosures 31
Item 5. Other Information 31
Item 6. Exhibits 32
Signatures 32

 

1

 

 

Forward Looking Statements

 

Certain statements that we make from time to time, including statements contained in this Quarterly Report on Form 10-Q constitute “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements. These statements, among other things, relate to our business strategy, goals and expectations concerning our products, future operations, prospects, plans and objectives of management. The words “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will” and similar terms and phrases are used to identify forward-looking statements in this presentation. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Forward-looking statements in this Quarterly Report on Form 10-Q include, without limitation, statements reflecting management’s expectations for future financial performance and operating expenditures (including our ability to continue as a going concern, to raise additional capital and to succeed in our future operations), expected growth, profitability and business outlook, increased sales and marketing expenses, and the expected results from the integration of our acquisitions.

 

Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from those anticipated by such statements. These factors include, among other things, the unknown risks and uncertainties that we believe could cause actual results to differ from these forward looking statements as set forth under the heading “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 31, 2017. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all of the risks and uncertainties that could have an impact on the forward-looking statements, including without limitation, risks and uncertainties relating to:

 

  our ability to manage our growth, including acquiring, partnering with, and effectively integrating acquired businesses into our infrastructure;
     
  our ability to comply with covenants contained in our credit agreement with our senior secured lender, Silicon Valley Bank and other future debt facilities;
     
  our ability to retain our clients and revenue levels, including effectively migrating and keeping new clients acquired through business acquisitions and maintaining or growing the revenue levels of our new and existing clients;
     
  our ability to attract and retain key officers and employees, including Mahmud Haq and other personnel critical to growing our business and integrating of our newly acquired businesses;
     
  our ability to raise capital and obtain and maintain financing on acceptable terms;
     
  our ability to compete with other companies developing products and selling services competitive with ours, and who may have greater resources and name recognition than we have;
     
  our ability to maintain operations in Pakistan and Sri Lanka in a manner that continues to enable us to offer competitively priced products and services;
     
  our ability to keep and increase market acceptance of our products and services;
     
  our ability to keep pace with a rapidly changing healthcare industry;
     
  our ability to consistently achieve and maintain compliance with a myriad of federal, state, foreign, local, payor and industry requirements, regulations, rules and laws;
     
  our ability to protect and enforce intellectual property rights; and
     
  our ability to maintain and protect the privacy of client and patient information.

 

Although we believe that the expectations reflected in the forward-looking statements contained in this Quarterly Report on Form 10-Q are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by law, we are under no duty to update or revise any of such forward-looking statements, whether as a result of new information, future events, or otherwise, after the date of this Quarterly Report on Form 10-Q.

 

You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

 

All references to “MTBC,” “Medical Transcription Billing, Corp.,” “we,” “us,” “our” or the “Company” mean Medical Transcription Billing, Corp. and its subsidiaries, except where it is made clear that the term means only the parent company.

 

2

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements (Unaudited)

 

MEDICAL TRANSCRIPTION BILLING, CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   September 30,   December 31, 
   2017   2016 
   (Unaudited)     
ASSETS        
CURRENT ASSETS:          
Cash  $2,789,382   $3,476,880 
Accounts receivable - net of allowance for doubtful accounts of $268,000 and $156,000 at September 30, 2017 and December 31, 2016, respectively   3,535,673    4,330,901 
Current assets - related party   25,203    13,200 
Prepaid expenses and other current assets   758,785    618,501 
Total current assets   7,109,043    8,439,482 
Property and equipment - net   1,424,732    1,588,937 
Intangible assets - net   2,997,211    5,833,706 
Goodwill   12,263,943    12,178,868 
Other assets   152,712    282,713 
TOTAL ASSETS  $23,947,641   $28,323,706 
LIABILITIES AND SHAREHOLDERS' EQUITY          
CURRENT LIABILITIES:          
Accounts payable  $1,017,774   $1,905,131 
Accrued compensation   848,571    2,009,911 
Accrued expenses   758,357    1,236,609 
Deferred rent (current portion)   79,150    61,437 
Deferred revenue (current portion)   52,145    41,666 
Accrued liability to related party   16,614    16,626 
Borrowings under line of credit   2,000,000    2,000,000 
Current portion of long-term debt   -    2,666,667 
Notes payable - other (current portion)   246,603    5,181,459 
Contingent consideration (current portion)   537,736    535,477 
Dividend payable   638,905    202,579 
Total current liabilities   6,195,855    15,857,562 
Long - term debt, net of discount and debt issuance costs   -    4,033,668 
Notes payable - other   137,550    166,184 
Deferred rent   371,273    433,186 
Deferred revenue   30,001    26,673 
Contingent consideration   131,957    394,072 
Deferred tax liability   510,530    345,530 
Total liabilities   7,377,166    21,256,875 
COMMITMENTS AND CONTINGENCIES (Note 8)          
SHAREHOLDERS' EQUITY:          
Preferred stock, par value $0.001 per share - authorized 2,000,000 shares; issued and outstanding 929,299 and 294,656 shares at September 30, 2017 and December 31, 2016, respectively   929    295 
Common stock, $0.001 par value - authorized 19,000,000 shares; issued 12,271,390 and 10,792,352 shares at September 30, 2017 and December 31, 2016, respectively; outstanding, 11,530,591 and 10,051,553 shares at September 30, 2017 and December 31, 2016, respectively   12,272    10,793 
Additional paid-in capital   40,985,992    26,038,063 
Accumulated deficit   (23,325,897)   (17,944,230)
Accumulated other comprehensive loss   (440,821)   (376,090)
Less: 740,799 common shares held in treasury, at cost at September 30, 2017 and December 31, 2016   (662,000)   (662,000)
Total shareholders' equity   16,570,475    7,066,831 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $23,947,641   $28,323,706 

 

See notes to condensed consolidated financial statements.

 

3

 

 

MEDICAL TRANSCRIPTION BILLING, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2017   2016   2017   2016 
NET REVENUE  $7,513,592   $5,341,002   $23,518,416   $15,663,687 
OPERATING EXPENSES:                    
Direct operating costs   4,171,932    2,670,385    13,592,492    7,292,415 
Selling and marketing   228,991    274,796    853,460    838,721 
General and administrative   2,474,139    2,569,399    8,232,613    8,173,272 
Research and development   249,045    174,876    843,294    575,059 
Change in contingent consideration   -    (196,882)   151,423    (607,978)
Depreciation and amortization   664,441    1,118,282    3,637,131    3,536,940 
Restructuring charges   -    -    275,628    - 
Total operating expenses   7,788,548    6,610,856    27,586,041    19,808,429 
OPERATING LOSS   (274,956)   (1,269,854)   (4,067,625)   (4,144,742)
OTHER:                    
Interest income   5,446    10,918    13,598    25,310 
Interest expense   (678,103)   (176,527)   (1,242,672)   (486,481)
Other income (expense) - net   32,494    (13,933)   107,364    (40,447)
LOSS BEFORE INCOME TAXES   (915,119)   (1,449,396)   (5,189,335)   (4,646,360)
Income tax provision   65,000    45,309    192,332    126,236 
NET LOSS  $(980,119)  $(1,494,705)  $(5,381,667)  $(4,772,596)
                     
Preferred stock dividend   652,697    231,473    1,283,151    549,945 
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS  $(1,632,816)  $(1,726,178)  $(6,664,818)  $(5,322,541)
Loss per common share:                    
Basic and diluted loss per share  $(0.14)  $(0.17)  $(0.62)  $(0.53)
Weighted-average basic and diluted shares outstanding   11,485,811    10,006,121    10,835,142    10,031,212 

 

See notes to condensed consolidated financial statements.

 

4

 

 

MEDICAL TRANSCRIPTION BILLING, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (UNAUDITED)

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2017   2016   2017   2016 
NET LOSS  $(980,119)  $(1,494,705)  $(5,381,667)  $(4,772,596)
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX                    
Foreign currency translation adjustment (a)   (33,880)   1,489    (64,731)   12,305 
COMPREHENSIVE LOSS  $(1,013,999)  $(1,493,216)  $(5,446,398)  $(4,760,291)

 

(a) No tax effect has been recorded as the Company recorded a valuation allowance against the tax benefit from its foreign currency translation adjustments.

 

See notes to condensed consolidated financial statements.

 

5

 

 

MEDICAL TRANSCRIPTION BILLING, CORP.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

 

  Preferred Stock   Common Stock   Additional Paid-in   Accumulated   Accumulated Other Comprehensive   Treasury (Common)   Total Shareholders' 
  Shares  Amount   Shares  Amount   Capital   Deficit   Loss   Stock   Equity 
Balance - January 1, 2017   294,656   $295    10,792,352   $10,793   $26,038,063   $(17,944,230)  $(376,090)  $(662,000)  $7,066,831 
Net loss   -    -    -    -    -    (5,381,667)   -    -    (5,381,667)
Foreign currency translation adjustment   -    -    -    -    -    -    (64,731)   -    (64,731)
Issuance of stock under the Amended and Restated Equity Incentive Plan   24,750    25    266,663    267    (267)   -    -    -    25 
Stock-based compensation, net of cash settlements   -    -    -    -    907,160    -    -    -    907,160 
Issuance of common stock, net of fees and expenses   -    -    1,000,000    1,000    1,971,065    -    -    -    1,972,065 
Issuance of common stock held as contingent consideration   -    -    212,375    212    331,464    -    -    -    331,676 
Issuance of preferred stock, net of fees and expenses   609,893    609    -    -    13,021,658    -    -    -    13,022,267 
Preferred stock dividends   -    -    -    -    (1,283,151)   -    -    -    (1,283,151)
Balance - September 30, 2017   929,299   $929    12,271,390   $12,272   $40,985,992   $(23,325,897)  $(440,821)  $(662,000)  $16,570,475 

 

See notes to condensed consolidated financial statements.

 

6

 

 

MEDICAL TRANSCRIPTION BILLING, CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016

 

   2017   2016 
OPERATING ACTIVITIES:          
Net loss  $(5,381,667)  $(4,772,596)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   3,637,131    3,536,940 
Deferred rent   (38,544)   (28,032)
Deferred revenue   13,807    (32,912)
Provision for doubtful accounts   357,671    205,289 
Provision for deferred income taxes   165,000    114,893 
Foreign exchange (gain) loss   (27,145)   72,360 
Interest accretion and write-off of deferred financing costs   672,998    145,038 
Non-cash restructuring charges   17,001    - 
Stock-based compensation expense   333,854    765,595 
Change in contingent consideration   151,423    (607,978)
Acquisition settlements   -    (26,296)
Changes in operating assets and liabilities:          
Accounts receivable   437,557    (160,523)
Other assets   107,532    211,651 
Accounts payable and other liabilities   (1,754,255)   90,843 
Net cash used in operating activities   (1,307,637)   (485,728)
INVESTING ACTIVITIES:          
Capital expenditures   (499,988)   (319,870)
Cash paid for acquisitions   (205,000)   (1,425,000)
Net cash used in investing activities   (704,988)   (1,744,870)
FINANCING ACTIVITIES:          
Contingent consideration payments   (79,603)   (153,799)
Settlement of tax withholding obligations on stock issued to employees   (195,912)   (8,500)
Proceeds from issuance of common stock, net of placement costs   2,000,000    - 
Proceeds from issuance of preferred stock, net of placement costs   13,484,552    1,270,528 
Proceeds from long term debt, net of costs   -    1,908,141 
Repayments of debt obligations   (7,626,088)   (554,002)
Repayment of Prudential obligation   (5,000,000)   - 
Proceeds from line of credit   7,000,000    6,000,000 
Repayments of line of credit   (7,000,000)   (6,000,000)
Payment of registration statement and bank costs   (335,239)   (119,406)
Preferred stock dividends paid   (846,825)   (506,603)
Purchase of common shares   -    (546,145)
Net cash provided by financing activities   1,400,885    1,290,214 
EFFECT OF EXCHANGE RATE CHANGES ON CASH   (75,758)   11,317 
NET DECREASE IN CASH   (687,498)   (929,067)
CASH - Beginning of the period   3,476,880    8,039,562 
CASH - End of period  $2,789,382   $7,110,495 
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:          
Vehicle financing obtained  $30,746   $189,725 
Contingent consideration resulting from acquisitions  $-   $678,368 
Dividends declared, not paid  $638,905   $202,578 
Purchase of prepaid insurance through assumption of note  $298,698   $313,577 
SUPPLEMENTAL INFORMATION - Cash paid during the period for:          
Income taxes  $9,513   $32,816 
Interest  $599,950   $321,530 

 

See notes to condensed consolidated financial statements.

 

7

 

 

MEDICAL TRANSCRIPTION BILLING, CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016 (UNAUDITED)

 

1. Organization and Business

 

Medical Transcription Billing, Corp. (and together with its subsidiaries “MTBC” or the “Company”) is a healthcare information technology company that offers an integrated suite of proprietary cloud-based electronic health records and practice management solutions, together with related business services, to healthcare providers. The Company’s integrated services are designed to help customers increase revenues, streamline workflows and make better business and clinical decisions, while reducing administrative burdens and operating costs. The Company’s services include full-scale revenue cycle management, electronic health records, and other technology-driven practice management services for private and hospital-employed healthcare providers. MTBC has its corporate offices in Somerset, New Jersey and maintains account management teams in various US offices and operates facilities in Pakistan and Sri Lanka.

 

MTBC was founded in 1999 and incorporated under the laws of the State of Delaware in 2001. In 2004, MTBC formed MTBC Private Limited (or “MTBC Pvt. Ltd.”) a 99.9% majority-owned subsidiary of MTBC based in Pakistan. The remaining 0.01% of the shares of MTBC Pvt. Ltd. is owned by the founder and Chief Executive Officer of MTBC. MTBC formed MTBC-Europe Sp. z.o.o. (or “MTBC-Europe”), a wholly-owned subsidiary of MTBC based in Poland in 2015. In 2016, MTBC formed MTBC Acquisition Corp. (“MAC”), a Delaware corporation, in connection with its acquisition of substantially all the assets of MediGain, LLC and its subsidiary, Millennium Practice Management Associates, LLC (together “MediGain). MAC has a wholly-owned subsidiary in Sri Lanka, RCM MediGain Colombo, Pvt. Ltd. In conjunction with its continued growth of its offshore operations in Pakistan and Sri Lanka, in April 2017, MTBC began the winding down of its operations in India and Poland. These operations have been terminated and the subsidiaries are being liquidated.

 

2. Liquidity

 

The Company previously adopted FASB Accounting Standard Codification (“ASC”) Topic 205-40, Presentation of Financial Statements – Going Concern, which requires that management evaluate whether there are relevant conditions and events that, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued. Based upon the analysis set forth below, management believes there is no longer substantial doubt about the Company’s ability to continue as a going concern and to meet the obligations as they become due within the next twelve months.

 

As part of the evaluation, management considered that on September 30, 2017, the Company had $2.8 million of cash and had positive working capital of $913,000. The loss before income taxes was $915,000 for the three months ended September 30, 2017, of which $664,000 represents non-cash depreciation and amortization and $463,000 of non-cash financing costs, which were written off as a result of the termination of the Opus Bank (“Opus”) credit agreement.

 

During the second and third quarter of 2017, the Company raised a total of $15.0 million in net proceeds from a series of equity financings. In May 2017, the Company completed a registered direct offering of one million shares of its common stock at $2.30 per share, raising net proceeds of approximately $2.0 million. Between June and September 2017, the Company completed five public offerings of approximately 610,000 shares of its 11% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Preferred Stock”) at $25.00 per share, raising net proceeds of approximately $13.0 million.

 

8

 

 

These equity financings improved the financial position of the Company and allowed us to repay the amount owed to Prudential during the third quarter. As a result of the common and preferred stock offerings, the Company’s cash position and the working capital deficit at the end of the second quarter improved to positive net working capital of $913,000 at the end of the third quarter. At September 30, 2017, the total amount outstanding under the Opus credit line was $2 million and the Company has $2.8 million of cash. In October 2017, the Company entered into a new credit facility with Silicon Valley Bank (“SVB”) and repaid and terminated its previous facility with Opus. The SVB credit facility is a $5 million secured revolving line of credit where borrowings are based on a formula of 200% of repeatable revenue adjusted by an annualized attrition rate as defined in the credit facility agreement. Under the SVB credit facility agreement, the facility currently available to the Company is in excess of $4 million. Management continues to focus on the Company’s overall profitability, including growing revenue and managing expenses, and expects that these efforts will continue to enhance our liquidity and financial position. The Company forecasts that cash flow from operations over the next 12 months will be positive and provide sufficient liquidity to the Company. Management has based its expectations on assumptions that may prove to be wrong.

 

3. BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 8-03. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the Company’s financial position as of September 30, 2017, the results of operations for the three and nine months ended September 30, 2017 and 2016 and cash flows for the nine months ended September 30, 2017 and 2016. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

 

The condensed consolidated balance sheet as of December 31, 2016 was derived from our audited consolidated financial statements. The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2016, which are included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2017.

 

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

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of this amendment is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09, as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, is effective for annual reporting periods beginning after December 15, 2017, and interim periods therein. These ASUs can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. The Company plans to adopt Topic 606 using the modified retrospective method when it becomes effective for the Company in the first quarter of 2018. We have assigned internal resources to assist in the evaluation of the potential impacts of this amendment. Implementation efforts to date have included a review of revenue agreements and the performance obligations contained therein, and review of our commercial terms and practices across our revenue streams and a comparison of our current revenue recognition procedures to those required under Topic 606. While the Company is continuing to assess the effects of the amendment, management currently believes that the new guidance will not have a material impact on our revenue recognition policies, practices or systems. The Company is continuing to evaluate the effect that Topic 606 will have on its consolidated financial statements and related disclosures, and preliminary assessments are subject to change. We are in the process of finalizing the analysis of the requirements under Topic 606 and quantifying the effects if any, from the implementation which should be completed during the fourth quarter of 2017.

 

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In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard will require organizations that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP — which requires only capital leases to be recognized on the balance sheet — the new ASU will require both types of leases to be recognized on the balance sheet. The amendments in this ASU are effective for financial statements issued for annual periods beginning after December 15, 2018 with earlier adoption permitted. The Company is currently evaluating the impact of this new standard.

 

In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU clarifies the definition of a business with the objective of adding guidance to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or business. The amendments in this ASU provide a more robust framework to use in determining when a set of assets and activities is a business. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The ASU is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Upon adoption, the Company will apply the guidance in this ASU when evaluating whether acquired assets and activities constitute a business.

 

Also in January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. The ASU modifies the accounting for goodwill impairment with the objective of simplifying the process of determining impairment levels. Specifically, the amendments in the ASU eliminate a step in the goodwill impairment test which requires companies to develop a hypothetical purchase price allocation when analyzing goodwill impairment. This eliminates the need for companies to estimate the fair value of individual existing assets and liabilities within a reporting unit. Instead, goodwill impairment will now be the amount by which a reporting unit’s total carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other aspects of the goodwill impairment test process have remained the same. The ASU is effective for annual periods beginning in the year 2020, with early adoption permitted for any impairment tests after January 1, 2017. The Company has elected to early adopt ASU 2017-04. There is currently no impact on the condensed consolidated financial statements as a result of this adoption.

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting (Topic 718), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity will account for the effects of a modification unless the fair value of the modified award is the same as the original award, the vesting conditions of the modified award are the same as the original award and the classification of the modified award as an equity instrument or liability instrument is the same as the original award. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The update is to be adopted prospectively to an award modified on or after the adoption date. Early adoption is permitted. The Company is currently evaluating the effect of this update but does not believe it will have a material impact on its consolidated financial statements and related disclosures.

 

4. ACQUISITIONS

 

2017 Acquisition

 

Effective July 1, 2017, the Company purchased substantially all of the assets of Washington Medical Billing, LLC (“WMB”), a Washington limited liability company. In accordance with the asset purchase agreement, the Company agreed to a non-refundable initial payment (the “Initial Payment Amount”) of $205,000. In addition to the Initial Payment Amount, the Company agreed to pay the sellers 22%, 23% and 24% of revenue collected from the WMB accounts in the first, second and third year, respectively, subsequent to the acquisition date to the extent such amounts in the aggregate exceed the Initial Payment Amount (the “WMB Installment Payments”). The WMB Installment Payments are to be paid quarterly commencing October, 2017. Based on the Company’s revenue forecast, it does not appear that there will be any WMB Installment Payments and therefore the preliminary aggregate purchase price of WMB was determined to be $205,000.

 

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The preliminary purchase price allocation for WMB was performed by the Company and is summarized as follows:

 

Customer relationships  $120,000 
Goodwill   85,000 
   $205,000 

 

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

 

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

 

Revenue earned from the WMB acquisition was approximately $165,000 during the quarter ended September 30, 2017.

 

2016 Acquisitions

 

On February 15, 2016 (the “GCB Closing Date”), the Company entered into an asset purchase agreement with Gulf Coast Billing, Inc. (“GCB”), pursuant to which the Company purchased substantially all of the assets of GCB. The aggregate final purchase price for GCB was $1,480,000 which consisted of cash of $1,250,000 and contingent consideration of $230,000. During the quarter ended June 30, 2017, an agreement was reached with GCB that no additional contingent consideration will be paid.

 

On May 2, 2016 (the “RMB Closing Date”), the Company entered into an asset purchase agreement with Renaissance Medical Billing, LLC (“RMB”), pursuant to which the Company purchased substantially all of the assets of RMB. In accordance with the RMB asset purchase agreement, the Company paid $175,000 in initial cash consideration (“RMB Initial Payment”), on the RMB Closing Date. In addition, the Company will pay RMB twenty-seven percent (27%) of the revenue earned and received from the acquired RMB accounts for three years, less the RMB Initial Payment which will be deducted in full from the required payments (the “RMB Installment Payments”) before any additional payment is made to the seller. The aggregate purchase price for RMB was $325,000 which consisted of cash of $175,000 and contingent consideration of $150,000. Through September 30, 2017, approximately $24,000 of contingent consideration payments have been made.

 

Effective July 1, 2016 (the “WFS Closing Date”), the Company entered into an asset purchase agreement with WFS Services, Inc. (“WFS”), pursuant to which the Company purchased substantially all of the assets of WFS. In accordance with the WFS asset purchase agreement, the Company did not pay any initial cash consideration on the WFS Closing Date but will make monthly payments of $5,000 for three years beginning July, 2016 subject to proportionate adjustment if annualized revenues decrease below a threshold specified in the APA. In addition, each quarter the Company will pay WFS fifty percent (50%) of Adjusted EBITDA, as defined in the WFS asset purchase agreement, generated from the WFS customer accounts acquired for three years. The aggregate purchase price of WFS was determined to be $298,000, which was recorded as contingent consideration. Through September 30, 2017, $60,000 of contingent consideration payments have been made.

 

On October 3, 2016, MAC acquired substantially all of the assets of MediGain. Since MediGain was in default of its obligations to Prudential prior to the acquisition, MAC purchased 100% of MediGain’s senior secured debt from Prudential.

 

The debt was collateralized by substantially all of MediGain’s assets, so immediately after purchasing the debt, MAC entered into a strict foreclosure agreement with MediGain transferring substantially all the assets (including accounts receivable, fixed assets, client relationships, and MediGain’s wholly-owned subsidiaries in India and Sri Lanka) to MAC in satisfaction of the outstanding obligations under the senior secured notes. The aggregate purchase price was $7 million which consisted of $2 million in cash paid at closing and $5 million, plus interest, which was paid during the third quarter of 2017.

 

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MediGain, GCB, RMB and WFS are collectively referred to as the “2016 Acquisitions.” Revenue earned from the 2016 Acquisitions was approximately $4.1 million and $12.8 million during the three and nine months ended September 30, 2017, respectively.

 

Pro forma financial information (Unaudited)

 

The unaudited pro forma information below represents condensed consolidated results of operations as if the 2016 Acquisitions and the WMB Acquisition occurred on January 1, 2016. The pro forma information has been included for comparative purposes and is not indicative of results of operations of the Company would have had if the acquisitions occurred on the above date, nor is it necessarily indicative of future results.

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2017   2016   2017   2016 
   ($ in thousands, except per share data) 
Total revenue  $7,514   $9,984   $24,036   $32,895 
Net loss attributable to common shareholders  $(1,581)  $(4,316)  $(6,584)  $(13,830)
Net loss per common share  $(0.14)  $(0.43)  $(0.61)  $(1.38)

 

5.GOODWILL AND INTANGIBLE ASSETS-NET

 

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. The following is the summary of the changes to the carrying amount of goodwill for the nine months ended September 30, 2017 and the year ended December 31, 2016:

 

   September 30, 2017   December 31, 2016 
Beginning gross balance  $12,178,868   $8,971,994 
Acquisitions   85,075    3,206,874 
Ending gross balance  $12,263,943   $12,178,868 

 

Intangible assets include customer contracts and relationships and covenants not-to-compete acquired in connection with acquisitions, as well as software purchase and development costs and trademarks acquired. Intangible assets - net as of September 30, 2017 and December 31, 2016 consist of the following:

 

   September 30, 2017   December 31, 2016 
Contracts and relationships acquired  $16,491,300   $16,371,375 
Non-compete agreements   1,236,377    1,236,377 
Other intangible assets   1,482,864    1,289,339 
Total intangible assets   19,210,541    18,897,091 
Less: Accumulated amortization   (16,213,330)   (13,063,385)
Intangible assets - net  $2,997,211   $5,833,706 

 

Amortization expense was approximately $3.2 million for both the nine months ended September 30, 2017 and 2016, and $508,000 and $1.0 million for the three months ended September 30, 2017 and 2016, respectively. The weighted-average amortization period is three years.

 

As of September 30, 2017, future amortization expense scheduled to be expensed is as follows:

 

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Years ending     
December 31     
2017 (three months)   $493,264 
2018    1,601,110 
2019    827,033 
2020    75,804 
Total   $2,997,211 

 

6.NET LOss per COMMON share

 

The following table presents the weighted-average shares outstanding for basic and diluted net loss per share for the three and nine months ended September 30, 2017 and 2016:

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
    2017    2016    2017    2016 
Basic and Diluted:                    
Net loss attributable to common shareholders  $(1,632,816)  $(1,726,178)  $(6,664,818)  $(5,322,541)
Weighted average shares applicable to common shareholders used in computing basic and diluted loss per share   11,485,811    10,006,121    10,835,142    10,031,212 
Net loss attributable to common shareholders per share - Basic and Diluted  $(0.14)  $(0.17)  $(0.62)  $(0.53)

 

All unvested restricted share units (“RSUs”), the 200,000 warrants granted to Opus in 2015 and 2016 and the two million warrants issued during the second quarter of 2017 as part of the sale of common stock have been excluded from the above calculations as they were anti-dilutive. Vested RSUs and vested restricted shares have been included in the above calculations.

 

7.Debt

 

Opus On September 2, 2015, the Company entered into a credit agreement with Opus. Opus extended a credit facility totaling $10 million to the Company, inclusive of $8 million of term loans and a $2 million revolving line of credit. The Company’s obligations to Opus were secured by substantially all of the Company’s domestic assets and 65% of the shares in its offshore subsidiaries. During October 2017, the Opus credit facility was replaced. See Note 15.

 

Interest expense in the consolidated statements of operations for both the three and nine months ended September 30, 2017 includes $463,000 of deferred financing costs which were written off as a result of the termination of the Opus credit agreement.

 

Prudential Deferred Purchase Price — During the current quarter, the entire amount due to Prudential of $5 million was paid, including $270,000 of accrued interest, which fully satisfied the amount owed.

 

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

 

Insurance Financing — The Company finances certain insurance purchases over the term of the policy life. The interest rate charged is 5.25%.

 

8.Commitments and Contingencies

 

Legal Proceedings — The Company is subject to legal proceedings and claims which have arisen in the ordinary course of business and have not been fully adjudicated. These actions, when ultimately concluded and determined, will not, in the opinion of management, have a material adverse effect upon the consolidated financial position, results of operations, or cash flows of the Company.

 

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Leases — The Company leases certain office space and other facilities under operating leases expiring through 2021. Certain of these leases contain renewal options.

 

Future minimum lease payments under non-cancelable operating leases for office space as of September 30, 2017 are as follows:

 

Years Ending    
December 31  Total 
2017 (three months)  $68,994 
2018   304,357 
2019   163,179 
Total  $536,530 

 

Total rental expense, included in direct operating costs and general and administrative expense in the condensed consolidated statements of operations, amounted to approximately $690,000 and $581,000 for the nine months ended September 30, 2017 and 2016, respectively, and approximately $237,000 and $202,000 for the three months ended September 30, 2017 and 2016, respectively.

 

Acquisitions — In connection with some of the Company’s acquisitions, contingent consideration as of September 30, 2017 is payable in the form of cash with payment terms through 2019. Depending on the terms of the agreement, if the performance measures are not achieved, the Company may pay less than the recorded amount, and if the performance measures are exceeded, the Company may pay more than the recorded amount.

 

9.SHAREHOLDERS’ EQUITY TRANSACTIONS

 

In August 2017, the Company completed two public preferred stock offerings whereby a total of 60,195 shares of its Preferred Stock were sold at $25.00 per share. As a result of this sale, the Company received net proceeds of approximately $1.3 million. In September 2017, the Company completed two public preferred stock offerings whereby a total of 255,000 shares of its Preferred Stock were sold at $25.00 per share. As a result of this sale, the Company received net proceeds of approximately $5.6 million. Dividends on the Preferred Stock of $2.75 annually per share are cumulative from the date of issue and are payable each month when, as and if declared by the Company’s Board of Directors. As of September 30, 2017, the Board of Directors has declared monthly dividends on the Preferred Stock payable through November 2017.

 

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

 

10.Related PARTIES

 

The Company had sales to a related party, a physician who is the wife of the CEO. Revenues from this customer were approximately $12,000 and $13,000 for the nine months ended September 30, 2017 and 2016, respectively, and approximately $4,000 and $5,000 for the three months ended September 30, 2017 and 2016, respectively. As of September 30, 2017 and December 31, 2016, the receivable balance due from this customer was approximately $1,500 and $1,600, respectively.

 

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The Company is a party to a nonexclusive aircraft dry lease agreement with Kashmir Air, Inc. (“KAI”), which is owned by the CEO. The Company recorded an expense of approximately $96,000 for both the nine months ended September 30, 2017 and 2016 and approximately $32,000 for both the three months ended September 30, 2017 and 2016. As of September 30, 2017 and December 31, 2016, the Company had a liability outstanding to KAI of approximately $17,000, which is included in accrued liability to related party in the condensed consolidated balance sheets.

 

The Company leases its corporate offices, temporary housing for its foreign visitors and a storage facility in New Jersey and its backup operations center in Bagh, Pakistan, from the CEO. The related party rent expense for the nine months ended September 30, 2017 and 2016 was approximately $141,000 and $131,000, respectively, and $47,000 and $43,000 for the three months ended September 30, 2017 and 2016, respectively, and is included in direct operating costs and general and administrative expense in the condensed consolidated statements of operations. Current assets-related party on the consolidated balance sheets includes security deposits related to the leases of the Company’s corporate offices in the amount of approximately $13,000 as of both September 30, 2017 and December 31, 2016. The September 30, 2017 balance also includes prepaid rent paid to the CEO of approximately $12,000.

 

11.STOCK-BASED COMPENSATION

 

In April 2014, the Company adopted the Medical Transcription Billing, Corp. 2014 Equity Incentive Plan (the “2014 Plan”), reserving a total of 1,351,000 shares of common stock for grants to employees, officers, directors and consultants. During April 2017, the 2014 Plan was amended whereby an additional 1,500,000 shares of common stock and 100,000 shares of Preferred Stock were added to the plan for future issuance. The name of the 2014 Plan was changed to the Amended and Restated Equity Incentive Plan (the “Incentive Plan”). As of September 30, 2017, 1,238,734 shares of common stock and 67,000 shares of Preferred Stock are available for grant. Permissible awards include incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance stock and cash-settled awards and other stock-based awards in the discretion of the Compensation Committee of the Board of Directors including unrestricted stock grants.

 

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

 

During the third quarter of 2017, a total of 200,000 RSUs were granted equally to the four outside members of the Board of directors and a total of 300,000 RSUs were granted equally to three executive officers. The RSUs vest over the next two years, at six month intervals.

 

The Company recognizes compensation expense on a straight-line basis over the total requisite service period for the entire award. For stock awards classified as equity, the market price of our common or Preferred Stock on the date of grant is used in recording the fair value of the award. For stock awards classified as a liability, the earned amount is marked to market based on the end of period common stock price. The following table summarizes the components of share-based compensation expense for the three and nine months ended September 30, 2017 and 2016:

 

Stock-based compensation included in the Condensed   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
Consolidated Statement of Operations:  2017   2016   2017   2016 
Direct operating costs  $1,705   $3,571   $7,162   $8,909 
General and administrative   124,789    131,077    318,870    731,690 
Research and development   (675)   3,767    7,822    6,910 
Selling and marketing   -    5,378    -    18,086 
Total stock-based compensation expense  $125,819   $143,793   $333,854   $765,595 

 

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The following table summarizes the RSU and restricted stock transactions related to the common stock under the Incentive Plan for the nine months ended September 30, 2017:

 

Outstanding and unvested at January 1, 2017   406,959 
Granted   528,000 
Vested   (327,159)
Forfeited   (29,331)
Outstanding and unvested at September 30, 2017   578,469 

 

Of the total outstanding and unvested at September 30, 2017, 548,334 RSUs and restricted stock awards are classified as equity and 30,135 RSUs are classified as a liability.

 

The liability for the cash-settled awards was approximately $17,000 and $31,000 at September 30, 2017 and December 31, 2016, respectively, and is included in accrued compensation in the condensed consolidated balance sheets.

 

12.INCOME TAXES

 

The deferred income tax provision for the nine months ended September 30, 2017 and 2016 primarily relates to the amortization of goodwill.

 

Although the Company is forecasting a return to profitability, it has incurred cumulative losses which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all Federal and state deferred tax assets as of September 30, 2017 and December 31, 2016. Some of the Federal NOL carry forward is currently subject to certain utilization limitations under Section 382 of the Internal Revenue Code.

 

The Company’s plan to repatriate earnings in its foreign locations to the United States requires that U.S. federal income taxes be provided on the Company’s earnings in those foreign locations. For state tax purposes, the Company’s foreign earnings generally are not taxed due to an exemption available in states where the Company currently transacts business.

 

13.RESTRUCTURING CHARGES

 

During March 2017, the Company decided to close its operations in Poland and India. In connection with the closing of these subsidiaries, in the first quarter of 2017, the Company expensed approximately $276,000 of restructuring charges representing primarily employee severance costs, remaining lease and termination fees, disposal of property and equipment and professional fees. The remaining amounts to be paid of approximately $19,000 are included in accrued expenses in the condensed consolidated balance sheet as of September 30, 2017.

 

14.FAIR VALUE OF FINANCIAL INSTRUMENTS

 

As of September 30, 2017 and December 31, 2016, the carrying amounts of receivables, accounts payable, accrued expenses and the amount due to Prudential (at December 31, 2016 only) approximated their estimated fair values because of the short term nature of these financial instruments.

 

Fair value measurements-Level 2

Our notes payable are carried at cost and approximate fair value since the interest rates being charged approximate market rates. The fair value of our term loans at December 31, 2016 was approximately $7.3 million. The Company’s outstanding borrowings under the line of credit with Opus had a carrying value of $2 million as of both September 30, 2017 and December 31, 2016. The fair value of the outstanding borrowings with Opus under the term loans at December 31, 2016 and the line of credit at December 31, 2016 and September 30, 2017 approximated the carrying value, as these borrowings bore interest based on prevailing variable market rates currently available at those dates. As a result, the Company categorizes these borrowings as Level 2 in the fair value hierarchy.

 

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Contingent Consideration

The Company’s contingent consideration of approximately $670,000 and $930,000 as of September 30, 2017 and December 31, 2016, respectively, are Level 3 liabilities. The fair value of the contingent consideration at September 30, 2017 and December 31, 2016 was primarily driven by changes in revenue estimates related to the acquisitions during 2015 and 2016, the price of the Company’s common stock on the Nasdaq Capital Market (only for the December 31, 2016 contingent consideration amount), the passage of time and the associated discount rate. Due to the number of factors used to determine contingent consideration, it is not possible to determine a range of outcomes. Subsequent adjustments to the fair value of the contingent consideration liability will continue to be recorded in the Company’s results of operations until all contingencies are settled.

 

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

 

   Fair Value Measurement at Reporting
Date Using Significant Unobservable
Inputs, Level 3
 
   Nine Months Ended September 30, 
   2017   2016 
Balance - January 1,  $929,549   $1,172,508 
Acquisitions   -    678,368 
Change in fair value   151,423    (607,978)
Settlement in the form of shares issued   (331,676)   - 
Payments   (79,603)   (153,799)
Balance - September 30,  $669,693   $1,089,099 

 

15. SUBSEQUENT EVENT

 

During October 2017, the Opus credit facility was replaced with a $5 million revolving line of credit from SVB. Interest on the SVB revolving line of credit is charged at the prime rate plus 1.75%. There is also a fee of one-half of 1% for the unused portion of the credit line. Available borrowings are subject to 200% of repeatable revenue as defined, reduced by an annualized attrition rate. The debt is secured by all of the Company’s domestic assets and 65% of the shares in its offshore facilities. Future acquisitions are subject to approval by SVB.

 

In connection with the SVB debt agreement, the Company paid approximately $90,000 of fees upfront and issued warrants for SVB to purchase 125,000 shares of its common stock, and committed to pay an annual anniversary fee of $50,000 a year. The warrants have a strike price equal to the highest volume weighted average price per share for any five consecutive trading days during the thirty consecutive trading-day period commencing on the fifteenth trading day immediately preceding the date of the loan agreement. They have a five-year exercise window, piggyback registration and net exercise rights, and will be valued once the strike price is determined. The SVB credit agreement contains various covenants and conditions governing the revolving line of credit.

 

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

 

The following is a discussion of our consolidated financial condition and results of operations for the three and nine months ended September 30, 2017 and 2016 and other factors that are expected to affect our prospective financial condition. The following discussion and analysis should be read together with our Condensed Consolidated Financial Statements and related notes beginning on page 4 of this Quarterly Report on Form 10-Q.

 

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

 

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. 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 are able to deliver our leading solutions at very competitive prices because we leverage our proprietary software, which automates our workflows and increases efficiency, together with our highly educated and specialized offshore workforce of more than 1,700 team members at labor costs that we believe to be approximately one-tenth the cost of comparable U.S.

 

Our flagship offering, PracticePro, empowers healthcare practices with the core software and business services they need to address industry challenges 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 consists of:

 

  Practice management software and related tools, which facilitate the day-to-day operation of a medical practice;
  Electronic health records (or EHR), which are easy to use, highly ranked, and allow our clients to reduce paperwork and qualify for government incentives;
  Revenue cycle management (or RCM) services, which include end-to-end medical billing, analytics, and related services; and
  Mobile Health (or mHealth) solutions, including smartphone applications that assist patients and healthcare providers in the provision of healthcare services.

 

Adoption of our solutions requires little or no 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 are based on a percentage of our clients’ collections. The standard fee for our complete, integrated, end-to-end solution is among the lowest in the industry.

 

During the third quarter of 2017, the Company introduced two new products – talkEHR, a voice enabled electronic health records (EHR) solution and EnrollmentPlus, a SaaS solution that streamlines the insurance enrollment workflow.

 

The Company has a clearinghouse service which allows clients to track claim status and includes services such as batch electronic claim and payment transaction clearing and web access for claim corrections. The Company also has an EDI service which provides a centralized electronic data interchange management system to record, manage and control the exchange of information. In addition, the Company has a printing and mailing operation.

 

Our growth strategy involves both acquisitive and organic growth. Both prongs of our strategy have yielded positive results for us historically.

 

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With regard to our acquisition strategy, we 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. 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.

 

Our investment in sales and marketing during 2017 has helped us sign new customers which we expect will accelerate organic growth. First, we actively partner with industry participants who cross-market our services and otherwise provide referrals. Second, our newly launched talkEHR is a free product, but is designed to encourage users to upgrade to a revenue-generating, premium billing solution. Since the third quarter launch of talkEHR, more than 200 providers have signed-up for talkEHR and a few have already upgraded to our premium billing. As we move forward, we intend to continue to strategically promote talkEHR to new users, while encouraging providers who have already signed-up to actively use talkEHR in their day-to-day practice and upgrade to our premium billing solution. Third, a key part of our organic growth strategy for larger groups involves active attendance and participation in industry tradeshows.

 

Our offshore operations in Pakistan and Sri Lanka accounted for approximately 29% and 32% of total expenses for the nine months ended September 30, 2017 and 2016, respectively. A significant portion of those expenses were personnel-related costs (approximately 79% and 75% for the nine months ended September 30, 2017 and 2016, respectively). Because personnel-related costs are significantly lower in Pakistan and Sri Lanka than in the U.S. and many other offshore locations, we believe our offshore operations give us a competitive advantage over many industry participants. All of the medical billing companies that we have acquired use domestic labor or subcontractors 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 labor costs to our offshore operations.

 

On October 3, 2016, MTBC Acquisition, Corp. (“MAC”), a newly formed, a wholly-owned subsidiary of MTBC, acquired substantially all the medical billing business and assets of MediGain, LLC, a Texas limited liability company, and its subsidiary Millennium Practice Management Associates, LLC, a New Jersey limited liability company (“Millennium”) (together “MediGain”). In connection with this acquisition, MTBC expects to generate at least $10 million of annual revenue from the customers acquired. Although there is no assurance that the customers will remain with MTBC, the Company expects that this acquisition will continue to be accretive to earnings during the remainder of 2017. During the fourth quarter of 2016 and the first three quarters of 2017, we made significant progress at integrating the acquired operations with MTBC, but in the short term, we had a significant number of additional U.S.-based employees from MediGain. This cost, as well as costs from MediGain’s operations in India and its offshore subcontractors, impacted MTBC’s expenses during the fourth quarter of 2016 and the first quarter of 2017.

 

Key Performance Measures

 

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

 

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

 

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

 

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

 

  Income tax expense or the cash requirements to pay our taxes;
  Interest expense, or the cash requirements necessary to service interest on principal payments, on our debt;
  Foreign currency gains and losses and asset impairment charges and other non-operating expenditures;
  Stock-based compensation expense, including customer incentives and related fees, and cash-settled awards, based on changes in the stock price;
  Non-cash depreciation and amortization charges, and does not reflect any cash requirements for replacement for capital expenditures;
  Integration costs, such as severance amounts paid to employees from acquired businesses, and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees, exit costs related to terminating leases and other contractual agreements, costs related to specific transactions and restructuring charges arising from discontinued operations; and
  Changes in contingent consideration.

 

Set forth below is a presentation of our adjusted EBITDA for the three and nine months ended September 30, 2017 and 2016:

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2017   2016   2017   2016 
   ($ in thousands) 
Net revenue  $7,514   $5,341   $23,519   $15,664 
                     
GAAP net loss  $(980)  $(1,495)  $(5,382)  $(4,773)
                     
Provision for income taxes   65    45    192    126 
Net interest expense   673    166    1,229    461 
Foreign exchange / other expense   (24)   14    (34)   40 
Stock-based compensation expense   126    194    334    816 
Depreciation and amortization   664    1,118    3,637    3,537 
Integration and transaction costs   85    285    636    609 
Change in contingent consideration   -    (197)   151    (608)
Adjusted EBITDA  $609   $130   $763   $208 

 

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

 

  Stock-based compensation expense, including customer incentives and related fees, and cash-settled awards, based on changes in the stock price;
  Amortization of purchased intangible assets;
  Integration costs, such as severance amounts paid to employees from acquired businesses, and transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees, exit costs related to terminating leases and other contractual agreements, costs related to specific transactions and restructuring charges arising from discontinued operations; and
  Changes in contingent consideration.

 

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Set forth below is a presentation of our adjusted operating income and adjusted operating margin, which represents adjusted operating income as a percentage of net revenue, for the three and nine months ended September 30, 2017 and 2016:

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2017   2016   2017   2016 
   ($ in thousands) 
Net revenue  $7,514   $5,341   $23,519   $15,664 
                     
GAAP net loss  $(980)  $(1,495)  $(5,382)  $(4,773)
Provision for income taxes   65    45    192    126 
Net interest expense   673    166    1,229    461 
Other (income) expense - net   (32)   14    (107)   40 
GAAP operating loss   (274)   (1,270)   (4,068)   (4,146)
GAAP operating margin   (3.6%)   (23.8%)   (17.3%)   (26.5%)
                     
Stock-based compensation expense   126    194    334    816 
Amortization of purchased intangible assets   419    949    2,881    3,077 
Integration and transaction costs   85    285    636    609 
Change in contingent consideration   -    (197)   151    (608)
Non-GAAP adjusted operating income  $356   $(39)  $(66)  $(252)
Non-GAAP adjusted operating margin   4.7%   (0.7%)   (0.3%)   (1.6%)

 

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

 

  Foreign currency gains and losses and asset impairment charges and other non-operating expenditures;
  Stock-based compensation expense, including customer incentives and related fees, and cash-settled awards, based on changes in the stock price;
  Amortization of purchased intangible assets;
  Integration costs, such as severance amounts paid to employees from acquired businesses or transaction costs, such as brokerage fees, pre-acquisition accounting costs and legal fees, exit costs related to terminating leases and other contractual agreements, costs related to specific transactions and restructuring charges arising from discontinued operations;
  Changes in contingent consideration; and
  Income tax expense resulting from the amortization of goodwill related to our acquisitions.

 

21

 

 

No tax effect has been provided in computing non-GAAP adjusted net income and non-GAAP adjusted net income per share as the Company has sufficient carry forward losses to offset the applicable income taxes. The following table shows our reconciliation of GAAP net loss to non-GAAP adjusted net income for the three and nine months ended September 30, 2017 and 2016:

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2017   2016   2017   2016 
   ($ in thousands) 
GAAP net loss  $(980)  $(1,495)  $(5,382)  $(4,773)
                     
Foreign exchange / other expense   (24)   14    (34)   40 
Stock-based compensation expense   126    194    334    816 
Amortization of purchased intangible assets   419    949    2,881    3,077 
Integration and transaction costs   85    285    636    609 
Change in contingent consideration   -    (197)   151    (608)
Income tax expense related to goodwill   55    42    165    115 
Non-GAAP adjusted net income  $(319)  $(208)  $(1,249)  $(724)

 

   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2017   2016   2017   2016 
GAAP net loss per share  $(0.14)  $(0.17)  $(0.62)  $(0.53)
                     
GAAP net loss per end-of-period share   (0.09)   (0.15)   (0.47)   (0.46)
Foreign exchange / other expense   0.00    0.00    0.00    0.00 
Stock-based compensation expense   0.01    0.02    0.03    0.08 
Amortization of purchased intangible assets   0.04    0.10    0.25    0.30 
Integration and transaction costs   0.01    0.03    0.06    0.06 
Change in contingent consideration   -    (0.02)   0.01    (0.06)
Income tax expense related to goodwill   0.00    0.00    0.01    0.01 
Non-GAAP adjusted net income per share  $(0.03)  $(0.02)  $(0.11)  $(0.07)
                     
End-of-period shares   11,530,591    10,295,370    11,530,591    10,295,370 

 

For purposes of determining non-GAAP adjusted net income per share, the Company used the number of common shares outstanding at the end of September 30, 2017 and 2016, including shares which were issued but have not been settled, and considered contingent consideration. Accordingly, the end-of-period diluted common shares include 248,625 of contingently issuable shares at September 30, 2016. No tax effect has been provided in computing non-GAAP adjusted net income and non-GAAP adjusted net income per common share as the Company has sufficient carry forward losses to offset the applicable income taxes.

 

Key Metrics

 

In addition to the line items in our consolidated financial statements, we regularly review the following key metrics to evaluate our business, measure our performance, identify trends in our business, prepare financial projections, make strategic business decisions, and assess market share trends and working capital needs. We believe information on these metrics is useful for investors to understand the underlying trends in our business.

 

Set forth below are our key operating and financial metrics for RCM customers using our platform, which excludes acquired customers who have not migrated to our platform as well as customers of our clearinghouse, EDI and other services. Revenue from practices using our proprietary platform accounted for approximately 47% of our revenue for the nine months ended September 30, 2017 and approximately 75% of our revenue for the nine months ended September 30, 2016.

 

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First Pass Acceptance Rate: We define first pass acceptance rate as the percentage of claims submitted electronically by us, through our platform, to insurers and clearinghouses that are accepted on the first submission and are not rejected for reasons such as insufficient information or improper coding. Our first-time acceptance rate was approximately 96% for the twelve months ended September 30, 2017 and 2016, which compares favorably to the average of the top twelve payers of approximately 95%, as reported by the American Medical Association.

 

First Pass Resolution Rate: First pass resolution rate measures the percentage of primary claims that are favorably adjudicated and closed upon a single submission. Our first pass resolution rate was approximately 94% for the twelve months ended September 30, 2017 and 2016.

 

Days in Accounts Receivable: Days in accounts receivable measures the median number of days between the day a claim is submitted by us on behalf of our customer, and the date the claim is paid to our customer. Our clients’ median days in accounts receivable was approximately 36 days for primary care and 41 days for combined specialties for the twelve months ended September 30, 2017, and approximately 31 days for primary care and 39 days for combined specialties for the twelve months ended September 30, 2016, as compared to the national average of 36 and 40 days, respectively, as reported by the Medical Group Management Association in 2016.

 

Providers and Practices Served: As of September 30, 2017, we provided RCM and related services to approximately 2,600 providers (which we define as physicians, nurses, nurse practitioners, physician assistants and other clinical staff that render bills for their services), representing approximately 740 practices. In addition, we served approximately 230 clients who were not medical practices, but are service organizations who serve the healthcare community. As of September 30, 2016, we served approximately 1,820 providers representing approximately 740 practices.

 

Sources of Revenue

 

Revenue: We primarily derive our revenues from revenue cycle management services, typically billed as a percentage of payments collected by our customers. This fee includes RCM as well as the ability to use our electronic health records and practice management software as part of the bundled fee. These payments accounted for approximately 89% of our revenues during both the three and nine months ended September 30, 2017, and 85% and 86% of our revenues during the three and nine months ended September 30, 2016, respectively.

 

We earned approximately 2% of our revenue from clearinghouse and EDI clients during both the three and nine months ended September 30, 2017, and 3% of our revenue from clearinghouse and EDI clients for both the three and nine months ended September 30, 2016. We earned approximately 5% and 4% of our revenue from printing and mailing operations during the three and nine months ended September 30, 2017, respectively, and 6% and 2% of our revenue from printing and mailing operations during the three and nine months ended September 30, 2016, respectively.

 

Operating Expenses

 

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

 

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

 

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

 

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

 

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

 

Depreciation and Amortization Expense. Depreciation expense is charged using the straight-line method over the estimated lives of the assets ranging from three to five years. Amortization expense is charged on either an accelerated or on a straight-line basis over a period of three years for most intangible assets acquired in connection with acquisitions.

 

Interest and Other Income (Expense). Interest expense consists primarily of interest costs related to our working capital line of credit, term loans and amounts due in connection with acquisitions, offset by interest income. Our other income (expense) results primarily from foreign currency transaction gains (losses).

 

Income Tax. In preparing our condensed consolidated financial statements, we estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and financial reporting purposes. These differences result in deferred income tax assets and liabilities. Although the Company is forecasting a return to profitability, it incurred cumulative losses which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all deferred tax assets as of September 30, 2017 and December 31, 2016.

 

Critical Accounting Policies and Estimates

 

We prepare our condensed consolidated financial statements in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue, expense and related disclosures. We base our estimates, assumptions and judgments on historical experience, current trends and various other factors that we believe to be reasonable under the circumstances. The accounting estimates used in the preparation of our condensed consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as our operating environment changes. On a regular basis, we review our accounting policies, estimates, assumptions and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

 

The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results of operations. There have been no material changes in our critical accounting policies and estimates from those described in the Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 31, 2017.

 

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Results of Operations

 

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

 

  

Three Months Ended

September 30,

  

Nine Months Ended

September 30,

 
   2017   2016   2017   2016 
Net revenue   100.0%   100.0%   100.0%   100.0%
Operating expenses:                    
Direct operating costs   55.5%   50.0%   57.8%   46.6%
Selling and marketing   3.0%   5.1%   3.6%   5.4%
General and administrative   32.9%   48.1%   35.0%   52.2%
Change in contingent consideration   0.0%   (3.7%)   0.6%   (3.9%)
Research and development   3.3%   3.3%   3.6%   3.7%
Depreciation and amortization   8.8%   20.9%   15.5%   22.6%
Restructuring charges   0.0%  0.0%  1.2%  0.0%
Total operating expenses   103.5%   123.7%   117.3%   126.6%
                     
Operating loss   (3.5%)   (23.7%)   (17.3%)   (26.6%)
                     
Interest expense - net   9.0%   3.1%   5.2%   2.9%
Other income (expense) - net   0.4%   (0.3%)   0.5%   (0.3%)
Loss before income taxes   (12.1%)   (27.1%)   (22.0%)   (29.8%)
Income tax provision   0.9%   0.8%   0.8%   0.8%
Net loss  (13.0%)   (27.9%)   (22.8%)   (30.6%)

 

Comparison of the three and nine months ended September 30, 2017 and 2016

 

  

Three Months Ended

September 30,

   Change   Nine Months Ended
September 30,
   Change 
   2017   2016   Amount   Percent   2017   2016   Amount   Percent 
Revenue  $7,513,592   $5,341,002   $2,172,590    41%  $23,518,416   $15,663,687   $7,854,729    50%

 

Revenue. Total revenue of $7.5 million and $23.5 million for the three and nine months ended September 30, 2017 increased by $2.2 million or 41% and $7.9 million or 50% from revenue of $5.3 million and $15.7 million for the three and nine months ended September 30, 2016. Total revenue for the three and nine months ended September 30, 2017 included approximately $4.1 million and $12.8 million of revenue from customers we acquired from the 2016 Acquisitions (primarily MediGain), offset by attrition from customers.

 

   Three Months Ended
September 30,
   Change   Nine Months Ended
September 30,
   Change 
   2017   2016   Amount   Percent   2017   2016   Amount   Percent 
Direct operating costs  $4,171,932   $2,670,385   $1,501,547    56%  $13,592,492   $7,292,415   $6,300,077    86%
Selling and marketing   228,991    274,796    (45,805)   (17%)   853,460    838,721    14,739    2%
General and administrative   2,474,139    2,569,399    (95,260)   (4%)   8,232,613    8,173,272    59,341    1%
Research and development   249,045    174,876    74,169    42%   843,294    575,059    268,235    47%
Change in contingent consideration   -    (196,882)   196,882    100%   151,423    (607,978)   759,401    125%
Depreciation   156,237    128,743    27,494    21%   484,429    369,204    115,225    31%
Amortization   508,204    989,539    (481,335)   (49%)   3,152,702    3,167,736    (15,034)   (0%)
Restructuring charges   -    -    -   100%   275,628    -    275,628   100%
Total operating expenses  $7,788,548   $6,610,856   $1,177,692   18%  $27,586,041   $19,808,429   $7,777,612   39%

 

Direct Operating Costs. Direct operating costs of $4.2 million and $13.6 million for the three and nine months ended September 30, 2017, respectively, increased by $1.5 million or 56% and $6.3 million or 86% from direct operating costs of $2.7 million and $7.3 million for the three and nine months ended September 30, 2016, respectively. The MediGain acquisition increased salary costs by $912,000 and $3.3 million in the U.S. and $172,000 and $733,000 in India and Sri Lanka and operational outsourcing costs by $107,000 and $466,000 during the three and nine months ended September 30, 2017, respectively. Postage and delivery costs increased by $243,000 and $690,000 for the three and nine months ended September 30, 2017, respectively, primarily due to the acquisition of WFS. Salary and other related expenses in Pakistan increased by $332,000 and $1.1 million for the three and nine months ended September 30, 2017, respectively, as a result of the additional employees in Pakistan hired to service customers of the 2016 Acquisitions.

 

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Selling and Marketing Expense. Selling and marketing expense of $229,000 and $853,000 for the three and nine months ended September 30, 2017, respectively, decreased by $46,000 or 17% and increased by $15,000 or 2% from selling and marketing expense of $275,000 and $839,000 for the three and nine months ended September 30, 2016, respectively.

 

General and Administrative Expense. General and administrative expense of $2.5 million for the three months ended September 30, 2017 decreased by $95,000 or 4% and for the nine months ended September 30, 2017, general and administrative expenses of $8.2 million increased by $59,000 or 1% compared to the same period in 2016. The reduction in general and administrative expense for the three months ended September 30, 2017 was primarily due to reduced salary costs and professional fees. The increase for the nine months ended September 30, 2017 compared to the same period in 2016 relates to additional salary costs from the MediGain acquisition. The integration of acquired businesses resulted in expense reductions related to the closing of offices and reducing third party expenses such as computer expenses, accommodation costs, office costs, and insurance expenses, which offset increased general and administrative resulting from the acquisitions.

 

Research and Development Expense. Research and development expense of $249,000 and $843,000 for the three and nine months ended September 30, 2017, respectively, increased by $74,000 or 42% and $268,000 or 47% from research and development expense of $175,000 and $575,000 for the three and nine months ended September 30, 2016, respectively, as a result of adding additional technical employees in Pakistan performing software development work.

 

Contingent Consideration. The change in contingent consideration of $151,000 during the nine months ended September 30, 2017 and $197,000 and $608,000 during the three and nine months ended September 30, 2016, respectively, relates to the change in the fair value of the contingent consideration from acquisitions. The expense for the nine months ended September 30, 2017 resulted from an increase in the price of the Company’s common stock for the Practicare shares that were held in escrow and released during June 2017.

 

Depreciation. Depreciation of $156,000 and $484,000 for the three and nine months ended September 30, 2017, respectively, increased by $27,000 or 21% and $115,000 or 31% from depreciation of $129,000 and $369,000 for the three and nine months ended September 30, 2016, respectively, primarily as a result of additional property and equipment purchases and the acquisition of property and equipment from the MediGain acquisition.

 

Amortization Expense. Amortization expense of $508,000 and $3.2 million for the three and nine months ended September 30, 2017, respectively, decreased by $481,000 and $15,000 from amortization expense of $990,000 and $3.2 million for the three and nine months ended September 30, 2016, respectively. This decrease during the three months ended September 30, 2017 resulted from the intangible assets acquired in connection with our 2014 acquisitions becoming fully amortized. The Company generally amortizes intangible assets over three years.

 

Restructuring Charges. In connection with the closing of its subsidiaries in Poland and India, as of March 31, 2017, the Company accrued approximately $276,000 of restructuring charges representing primarily employee severance costs, remaining lease and termination fees and professional fees. The Company anticipates that the liquidation will be completed in early 2018. A substantial amount of the work performed by these locations was transferred to the Pakistan facility. The Company will also be using an outside contractor to perform some of the work previously performed by the Indian subsidiary. As a result of closing the Poland and India facilities, the Company will no longer need to fund the costs of these facilities.

 

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   Three Months Ended
September 30,
   Change   Nine Months Ended
September 30,
   Change 
   2017   2016   Amount   Percent   2017   2016   Amount   Percent 
Interest income  $5,446   $10,918   $(5,472)   (50%)  $13,598   $25,310   $(11,712)   (46%)
Interest expense   (678,103)   (176,527)   (501,576)   (284%)   (1,242,672)   (486,481)   (756,191)   (155%)
Other income (expense) - net   32,494    (13,933)   46,427    333%   107,364    (40,447)   147,811    365%
Income tax provision   65,000    45,309    19,691    43%   192,332    126,236    66,096    52%

 

Interest Income. Interest income of $5,000 and $14,000 for the three and nine months ended September 30, 2017, respectively, decreased by $5,000 or 50% and $12,000 or 46% from interest income of $11,000 and $25,000 for the three and nine months ended September 30, 2016, respectively. Interest income primarily represents late fees from customers.

 

Interest Expense. Interest expense of $678,000 and $1.2 million for the three and nine months ended September 30, 2017, respectively, increased by $502,000 or 284% and $756,000 or 155% from interest expense of $177,000 and $486,000 for the three and nine months ended September 30, 2016, respectively. This increase was primarily due to additional interest costs on borrowings under our term loans and line of credit and amounts related to the MediGain acquisition. Also, included in the 2017 interest expense is $463,000 of deferred financing costs related to the Opus credit agreement, which were written off as a result of the loans being paid off and the agreement terminated two years earlier than anticipated.

 

Other Income (Expense) - net. Other income - net was $32,000 and $107,000 for the three and nine months ended September 30, 2017, respectively, compared to other expense - net of $14,000 and $40,000 for the three and nine months ended September 30, 2016, respectively. Included in other income (expense) are foreign currency transaction gains (losses) primarily resulting from transactions in foreign currencies other than the functional currency. These transaction gains and losses are recorded in the condensed consolidated statements of operations related to the recurring measurement and settlement of such transactions. Other income for the nine months ended September 30, 2017 also includes $59,000 in cash received, net of obligations assumed, from the former owners of an acquired business as compensation for early termination of a client contract.

 

Income Tax Provision. There was a $65,000 and $192,000 provision for income taxes for the three and nine months ended September 30, 2017, respectively, an increase of $20,000 or 43% and $66,000 or 52% compared to the provision for income taxes of $45,000 and $126,000 for the three and nine months ended September 30, 2016, respectively. Included in the nine month ended September 30, 2017 and 2016 tax provisions are $165,000 and $115,000, respectively, deferred income tax provisions related to the amortization of goodwill. The increase in the income tax provisions is due to additional deferred income taxes relating to the Company’s acquisitions. The pre-tax loss decreased from $1.4 million for the three months ended September 30, 2016, to $915,000 and increased from $4.6 million to $5.2 million from the nine months ended September 30, 2016 to the same period in 2017. Although the Company is forecasting a return to profitability, it incurred three years of cumulative losses which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance was recorded against all deferred tax assets at September 30, 2017 and 2016.

 

Liquidity and Capital Resources

 

The Company had a cash balance of $2.8 million at September 30, 2017, and an outstanding balance of $2.0 million drawn on its revolving credit facility with Opus Bank (“Opus”).

 

During October 2017, the Company repaid and closed its Opus credit facility and replaced it with a $5 million revolving line of credit with Silicon Valley Bank (“SVB”). Borrowings under the SVB facility are based on amounts on 200% of repeatable revenue and adjusted for an annualized recurring churn rate. Under the SVB agreement, the facility currently available to the Company is in excess of $4.0 million.

 

During the nine months ended September 30, 2017, there was negative cash flow from operations of approximately $1.3 million, as the Company integrated its 2016 Acquisitions, the largest of which was MediGain. During the three months ended September 30, 2017, cash flow used by operations was $619,000. Included in this amount is $270,000 of interest paid to Prudential.

 

27

 

 

The following table summarizes our cash flows:

 

   Three Months Ended
September 30,
   Nine Months Ended
September 30,
 
   2017   2016   2017   2016 
Net cash used in operating activities  $(618,752)  $(169,023)  $(1,307,637)  $(485,728)
Net cash used in investing activities   (359,773)   (127,461)   (704,988)   (1,744,870)
Net cash (used in) provided by financing activities   (1,990,525)   783,673    1,400,885    1,290,214 
Effect of exchange rate changes on cash   (52,054)   4,385    (75,758)   11,317 
Net (decrease) increase in cash  $(3,021,104)  $491,574   $(687,498)  $(929,067)

 

In September 2015, the Company secured a $10 million credit facility from Opus, including an $8 million term loan and a $2 million revolving line of credit. During October 2017, the credit facility with Opus was repaid and terminated, and replaced with a $5 million revolving line of credit from SVB. The Company has available in excess of $4.0 million under the SVB facility.

 

The Company had $2.8 million of cash and had positive working capital of $913,000 at September 30, 2017. The loss before income taxes was $915,000 for the three months ended September 30, 2017, of which $664,000 was non-cash depreciation and amortization. Additionally, the non-cash write-off of the deferred financing costs due to early the termination of the Opus credit agreement was $463,000.

 

Management achieved extensive expense reductions following the acquisition of MediGain in October 2016. The cost cutting included closing certain domestic and foreign facilities, eliminating reliance on subcontractors, and reducing non-essential personnel where work could be performed by offshore employees more cost-effectively. Direct operating and general and administrative costs decreased by $1.9 million and $1.8 million, respectively from the fourth quarter of 2016 to the third quarter of 2017. This represented reductions of 32% and 42%, respectively.

 

During the second and third quarter of 2017, the Company completed several equity financings totaling approximately $15.0 million in net proceeds.

 

Collectively, these developments dramatically improved the financial position of the Company. Management continues to focus on the Company’s overall profitability, including growing revenue and managing expenses, and expects that these efforts will continue to enhance our liquidity and financial position, allowing us to run our business, and comply with all bank covenants.

 

Operating Activities

 

Although revenue increased by $7.9 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, operating expenses increased by $7.8 million for the same period primarily due to the acquisition of MediGain in the fourth quarter of 2016. Cash used in operating activities was $1.3 million during the nine months ended September 30, 2017, compared to $486,000 during the nine months ended September 30, 2016. The increase in the net loss of $609,000 included the following changes in non-cash items: additional depreciation and amortization of $100,000, additional provision for doubtful accounts of $152,000, additional interest accretion of $528,000 and a change in contingent consideration of $759,000, offset by a decrease in stock compensation expense of $432,000 and a change in working capital of $1.4 million.

 

Accounts receivable decreased by $438,000 for the nine months ended September 30, 2017, compared with an increase of $161,000 for the nine months ended September 30, 2016. Accounts payable, accrued compensation and accrued expenses decreased $1.8 million for the nine months ended September 30, 2017 (primarily due to the payment of liabilities assumed in connection with the MediGain acquisition and the reduction in the use of outside contractors) compared to an increase of $91,000 for the nine months ended September 30, 2016.

 

28

 

 

Investing Activities

 

Cash used in investing activities during the nine months ended September 30, 2017 was $705,000, a decrease of $1.0 million compared to $1.7 million during the nine months ended September 30, 2016. During the nine months ended September 30, 2017, $205,000 was paid in connection with the acquisition of WMB. During the nine months ended September 30, 2016, $1.25 million and $175,000 was paid in connection with the acquisitions of GCB and RMB, respectively.

 

Financing Activities

 

Cash provided by financing activities during the nine months ended September 30, 2017 was $1.4 million, compared to $1.3 million during the nine months ended September 30, 2016. Cash provided by financing activities during the nine months of 2017 includes $13.0 million of net proceeds from issuing approximately 610,000 shares of preferred stock, $2.0 million raised from issuing one million shares of common stock, offset by $7.6 million of repayments for debt obligations, a $5 million payment to Prudential and $847,000 of preferred stock dividends. Cash provided by financing activities for nine months ended September 30, 2016 included $2 million of additional borrowings on the Opus line of credit, offset by $554,000 repayment of debt obligations, $507,000 of preferred stock dividends and $546,000 of repurchases of common stock. Average borrowings from our revolving line of credit were $178,000 for the nine months ended September 30, 2016, compared to $1.4 million for the nine months ended September 30, 2017.

 

During October 2017, the Company replaced its Opus credit facility with a $5 million revolving line of credit from SVB. Borrowings under the credit facility are based on 200% of repeatable revenue reduced by an annualized attrition rate, as defined in the agreement. The Company currently has in excess of $4 million available on the SVB credit line.

 

Contractual Obligations and Commitments

 

We have contractual obligations under our line of credit and related to contingent consideration in connection with the acquisitions made in 2015 and 2016. We also maintain operating leases for property and certain office equipment. For additional information, see Contractual Obligations and Commitments under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the SEC on March 31, 2017.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2017 and 2016, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special-purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Other than our operating leases for office space, computer equipment and other property, we do not engage in off-balance sheet financing arrangements.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

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

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, based on the 2013 framework and criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2017 as required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

 

29

 

 

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

 

During the current quarter, we have finalized the integration and validation of controls for MediGain into the internal control practices for the Company.

 

Except as described above in the preceding paragraph, during the quarter ended September 30, 2017, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

30

 

 

Part II. Other Information

 

Item 1. Legal Proceedings

 

From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. 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, operating results, financial condition or cash flows.

 

Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm and other factors.

 

Item 1A. Risk Factors

 

Pursuant to the instructions of Item 1A of Form 10-Q, a smaller reporting company is not required to provide the information required by this Item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Purchases of Equity Securities

 

The Company is prohibited from paying dividends on its common stock without the consent of its senior lender, SVB.

 

Item 3. Defaults upon Senior Securities

 

Not applicable.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

Not applicable.

 

31

 

 

Item 6. Exhibits

 

Exhibit Number   Exhibit Description
     
31.1   Certification of the Company’s Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), of the Securities Exchange Act of 1934, as amended.
     
31.2   Certification of the Company’s Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), of the Securities Exchange Act of 1934, as amended.
     
32.1*   Certification of the Company’s Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
32.2*   Certification of the Company’s Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS   XBRL Instance
     
101.SCH   XBRL Taxonomy Extension Schema
     
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
     
101.LAB   XBRL Taxonomy Extension Label Linkbase
     
101.PRE   XBRL Taxonomy Extension Presentation Linkbase
     
101.DEF   XBRL Taxonomy Extension Definition Linkbase

 

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

 

32

 

 

Signatures

 

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

 

    Medical Transcription Billing, Corp.
       
November 6, 2017   By: /s/ Mahmud Haq
Date     Mahmud Haq
      Chairman of the Board and Chief Executive Officer
       
November 6, 2017   By: /s/ Bill Korn
Date     Bill Korn
      Chief Financial Officer

 

33

 

 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Mahmud Haq, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Medical Transcription Billing, Corp.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  Medical Transcription Billing, Corp.
   
  By: /s/ Mahmud Haq
    Mahmud Haq
    Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
Dated:    
November 6, 2017    

 

 

 

EX-31.2 3 ex31-2.htm

 

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Bill Korn, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Medical Transcription Billing, Corp.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

  Medical Transcription Billing, Corp.
   
  By: /s/ Bill Korn
    Bill Korn
    Chief Financial Officer (Principal Financial Officer )
Dated:    
November 6, 2017    

 

 

 

EX-32.1 4 ex32-1.htm

 

Exhibit 32.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Based on my knowledge, I, Mahmud Haq, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Medical Transcription Billing, Corp. on Form 10-Q for the quarterly period ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Medical Transcription Billing, Corp.

 

  Medical Transcription Billing, Corp.
   
  By: /s/ Mahmud Haq
    Mahmud Haq
    Chairman of the Board and Chief Executive Officer(Principal Executive Officer)
Dated:    
November 6, 2017    

 

   

 

EX-32.2 5 ex32-2.htm

 

Exhibit 32.2

 

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Based on my knowledge, I, Bill Korn, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Medical Transcription Billing, Corp. on Form 10-Q for the quarterly period ended September 30, 2017 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Medical Transcription Billing, Corp.

 

  Medical Transcription Billing, Corp.
   
  By: /s/ Bill Korn
    Bill Korn
    Chief Financial Officer (Principal Financial Officer)
Dated:    
November 6, 2017    

 

   

 

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net LOSS BEFORE INCOME TAXES Income tax provision NET LOSS Preferred stock dividend NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS Loss per common share: Basic and diluted loss per share Weighted-average basic and diluted shares outstanding Statement of Comprehensive Income [Abstract] NET LOSS OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX Foreign currency translation adjustment (a) COMPREHENSIVE LOSS Statement [Table] Statement [Line Items] Balance Balance, shares Net loss Foreign currency translation adjustment Issuance of stock under the Amended and Restated Equity Incentive Plan Issuance of stock under the Amended and Restated Equity Incentive Plan, shares Stock-based compensation, net of cash settlements Issuance of common stock, net of fees and expenses Issuance of common stock, net of fees and expenses, shares Issuance of common stock held as contingent consideration Issuance of common stock held as contingent consideration, shares Issuance of preferred stock, net of fees and expenses Issuance of preferred stock, net of fees and expenses, shares Preferred stock dividends Balance Balance, shares Statement of Cash Flows [Abstract] OPERATING ACTIVITIES: Adjustments to reconcile net loss to net cash used in operating activities: Deferred rent Deferred revenue Provision for doubtful accounts Provision for deferred income taxes Foreign exchange (gain) loss Interest accretion and write-off of deferred financing costs Non-cash restructuring charges Stock-based compensation expense Acquisition settlements Changes in operating assets and liabilities: Accounts receivable Other assets Accounts payable and other liabilities Net cash used in operating activities INVESTING ACTIVITIES: Capital expenditures Cash paid for acquisitions Net cash used in investing activities FINANCING ACTIVITIES: Contingent consideration payments Settlement of tax withholding obligations on stock issued to employees Proceeds from issuance of common stock, net of placement costs Proceeds from issuance of preferred stock, net of placement costs Proceeds from long term debt, net of costs Repayments of debt obligations Repayment of Prudential obligation Proceeds from line of credit Repayments of line of credit Payment of registration statement and bank costs Preferred stock dividends paid Purchase of common shares Net cash provided by financing activities EFFECT OF EXCHANGE RATE CHANGES ON CASH NET DECREASE IN CASH CASH - Beginning of the period CASH - End of period SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES: Vehicle financing obtained Contingent consideration resulting from acquisitions Dividends declared, not paid Purchase of prepaid insurance through assumption of note SUPPLEMENTAL INFORMATION - Cash paid during the period for: Income taxes Interest Organization, Consolidation and Presentation of Financial Statements [Abstract] Organization and Business Liquidity [Abstract] Liquidity Basis of Presentation Business Combinations [Abstract] Acquisitions Goodwill and Intangible Assets Disclosure [Abstract] Goodwill and Intangible Assets-Net Earnings Per Share [Abstract] Net Loss Per Common Share Debt Disclosure [Abstract] Debt Commitments and Contingencies Disclosure [Abstract] Commitments and Contingencies Equity [Abstract] Shareholders' Equity Transactions Related Party Transactions [Abstract] Related Parties Disclosure of Compensation Related Costs, Share-based Payments [Abstract] Stock-Based Compensation Income Tax Disclosure [Abstract] Income Taxes Restructuring and Related Activities [Abstract] Restructuring Charges Fair Value Disclosures [Abstract] Fair Value of Financial Instruments Subsequent Events [Abstract] Subsequent Event Schedule of Business Acquisitions, by Acquisition Business Acquisition, Pro Forma Information Schedule of Intangible Assets and Goodwill Schedule of Finite-Lived Intangible Assets Schedule of Finite-Lived Intangible Assets, Future Amortization Expense Schedule of Losses Per Share, Basic and Diluted Schedule of Future Minimum Lease Payments Under Non-cancelable Operating Leases Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs Disclosure of Share-based Compensation Arrangements by Share-based Payment Award Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation Equity method investment, ownership percentage in majority-owned subsidiary based in Pakistan Cash and Cash Equivalents [Axis] Working capital surplus Net loss before taxes Depreciation and amortization expenses Non cash financing cost Proceeds from a series of equity financings Number of stock shares issued during the period Shares issued price per share Net proceeds from issuance of common stock Net proceeds from issuance of preferred stock Line of credit Line of credit facility Maximum borrowing capacity Revolving line of credit secured on repeatable revenue percentage Non-refundable initial payment amount Installment payments percentage Payments to acquire business Weighted-average amortization period of acquired intangible assets Revenue earned from the WMB acquisition Business combination, recognized identifiable assets acquired and liabilities assumed, liabilities, total Business combination, recognized identifiable assets acquired and liabilities assumed, cash and equivalents paid Business combination, contingent consideration Initial cash consideration Future payment as a percentage of revenue Contingent consideration paid since acquisition through September 30, 2017 Required monthly payments Future payment as a percentage of EBITDA Purchase of percentage of senior secured debt Purchase price for acquisition Purchase price paid at closing Purchase price paid during 2017 Revenues Customer relationships Total Total revenue Net loss attributable to common shareholders Net loss per common share Amortization expenses Weighted-average amortization period Beginning gross balance Acquisitions Ending gross balance Total intangible assets Less: Accumulated amortization Intangible assets- net 2017 (three months) 2018 2019 2020 Total Number of warrant shares granted Net loss attributable to common shareholders Weighted average shares applicable to common shareholders used in computing basic and diluted loss per share Net loss attributable to common shareholders per share - Basic and Diluted Credit facility, maximum borrowing capacity Percentage of shares secured for debt Deferred financing costs Payments for deferred purchase Price Accrued interest Debt instrument term description Insurance financing interest rate Operating leases expire year Operating leases, rent expense 2017 (three months) 2018 2019 Total Shares issued price per share Cumulative preferred stock dividend per share Preferred stock redemption price per share Receivable balance due from this customer Security deposit Prepaid rent Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table] Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] Liability Class [Axis] Share-based compensation arrangement by share-based payment award, number of shares authorized Number of shares issued Share-based compensation arrangement by share-based payment award, number of shares available for grant Restricted shares granted to outside members of the Board of Directors Unvested stock option award, equity Unvested stock option award, liability Liability for cash-settled awards Total share-based compensation expense Schedule of Share-based Compensation Arrangements by Share-based Payment Award [Table] Share-based Compensation Arrangement by Share-based Payment Award [Line Items] Outstanding and unvested at beginning Granted Vested Forfeited Outstanding and unvested at ending Restructuring Charges Details Narrative Accrued restructuring charges Fair Value Measurements, Recurring and Nonrecurring [Table] Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] Long-term debt, fair value Business combination, contingent consideration, liability, current and long term portion Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table] Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] Balance, beginning Acquisitions Change in fair value Settlement in the form of shares issued Payments Balance, ending Revolving line of credit Revolving line of credit, interest rate - Prime plus Unsecured portion of credit line fee, percentage Secured revolving line of credit percentage Percentage of shares in offshore facilities Payment of fees Number of warrants to purchase shares of common stock Payments for annual anniversary fee Carrying value as of the balance sheet date of obligations incurred through that date and payable arising from related party transactions and due within one year or within the normal operating cycle if longer. April One Two Thousand Eighteen [Member]. Assets Not Placed In Service [Member] Bank Direct Capital Finance [Member] Board of Director [Member] Client and Administrative [Member] Client [Member] Contingent consideration payments. Contribution Retirement Plan [Member] Customer Loyalty Program [Member] Customer Relationship [Member] Deferred Plan [Member] Direct Operating Costs [Member] Dividends declared, not paid. Domestic Lease [Member] Employees Officers Directors And Consultants [Member] Federal [Member] Gulf Coast Billing Inc [Member] India [Member] Insurance Financing [Member] January 2017 [Member] July 2016 [Member] Kashmir Air, Inc [Member] The entire disclosure related to liquidity [Text Block]. March Twenty Nine Two Thousand Seventeen [Member]. March Two Thousand Seventeen [Member] Med Tech Professional Billing [Member] MediGain Acquisition [Member] MediGain [Member] Medical Billing Company [Member] Medical Billing [Member] No Customer [Member] The increase during the period in finance lease obligations due to entering into new finance leases. November Four Two Thousand Twenty [Member]. November 2015 [Member] October [Member] October One Two Thousand Seven Teen [Member]. One Customer [Member] Opus Bank Agreement [Member] Opus Bank Loan [Member] Opus Bank Term Loan [Member] Opus Credit Agreement [Member]. Opus Debt [Member] Other Services [Member] Outside s [Member] Pakistani Rupees [Member] Physician [Member] Pakistan [Member] Amount of expense (income) related to write-down of receivables to the amount expected to be collected. Includes, but is not limited to, accounts receivable and notes receivable. Prudentia [lMember] Prudentia Payable [lMember] Qualified Compensation Deferred Plan [Member] Renaissance Medical Billing, LLC [Member] Senior Secured Notes [Member] Series A Cumulative Redeemable Preferred Stock [Member] Series A Cumulative Refeemable Preferred Stock [Member] SoftCare And Med Tech Acquisitions [Member] SoftCare Solutions, Inc [Member] Sri Lanka [Member] State [Member] Subsidiary In Pakistan [Member] TD Bank [Member] Term Loan [Member] Term Loan [Member] Total [Member] 2015 Acquisitions [Member] Two Thousand Fourteen Equity Incentive Plan [Member] 2016 Acquisitions [Member] Vehicle Financing Notes [Member] WFS Services, Inc [Member] Non-cash restructuring charges. May 15, 2017 [Member] January 1, 2018 [Member] April 2017 [Member] Represents the percentage of shares secured for debt obligation during the reporting period. 2014 Plan [Member] Mtbc Pvt Ltd [Member]. Purchase of percentage of senior secured debt. India And Sri Lanka [Member] Future payment as a percentage of revenue. Future payment as a percentage of EBITDA. Contingent consideration paid since acquisition through 03/31/2017. Opus Term Loan [Member] MTBC [Member] Issuance of common stock held as contingent consideration. Issuance of common stock held as contingent consideration, shares. 11% Series A Cumulative Redeemable Preferred Stock [Member] Credit Facility [Member] Opus Bank [Member] 2014 Acquisitions [Member] Single Institutional Investor [Member] Unvested stock option award, liability. Asset Purchase Agreement [Member] Washington Medical Billing, LLC [Member] First Year [Member] Second Year [Member] Third Year [Member] GCB [Member] Initial Prime Plus [Member] Maximum Prime Plus [Member] Amended and Restated Equity Incentive Plan [Member] Purchase of prepaid insurance through assumption of note. Repayment of Prudential obligation. Proceeds from a series of equity financings. WMB [Member] Payments for deferred purchase price. Insurance financing interest rate. Two Public Preferred Stock Offerings [Member] Board of Directors [Member] Opus Credit Facility [Member] Unsecured portion of credit line fee, percentage. Payment of fees. Payments for annual anniversary fee. SVB Credit Facility Agreement [Member] Acquisition settlements. Non cash financing cost. Secured revolving line of credit percentage. October 2017 [Member] Three Executive Officers [Member] Percentage of shares in offshore facilities. SVB Debt Agreement [Member] Revenue Collected from WMB Accounts [Member] Purchase price paid during the period. Contracts and Relationships Acquired [Member] Revolving line of credit secured on repeatable revenue percentage. Working capital surplus. Assets, Current Assets Liabilities, Current Liabilities Treasury Stock, Value Stockholders' Equity Attributable to Parent Liabilities and Equity Operating Expenses Operating Income (Loss) Interest Expense, Other Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest Net Income (Loss) Available to Common Stockholders, Basic Comprehensive Income (Loss), Net of Tax, Attributable to Parent Shares, Outstanding Straight Line Rent Increase (Decrease) in Deferred Revenue Foreign Currency Transaction Gain (Loss), Realized AcquisitionSettlements Increase (Decrease) in Accounts Receivable Increase (Decrease) in Other Operating Assets Net Cash Provided by (Used in) Operating Activities Payments to Acquire Productive Assets Payments to Acquire Businesses, Net of Cash Acquired Net Cash Provided by (Used in) Investing Activities ContingentConsiderationPaymentsFinancingActivities Payments Related to Tax Withholding for Share-based Compensation Repayments of Other Short-term Debt RepaymentOfPrudentialObligation Repayments of Lines of Credit Payments of Stock Issuance Costs Payments of Ordinary Dividends, Preferred Stock and Preference Stock Payments for Repurchase of Common Stock Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net Goodwill, Gross Goodwill, Acquired During Period Operating Leases, Future Minimum Payments, Remainder of Fiscal Year Operating Leases, Future Minimum Payments Due, Next Twelve Months Operating Leases, Future Minimum Payments, Due in Two Years Operating Leases, Future Minimum Payments Due Sale of Stock, Price Per Share Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Purchases Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Period Increase (Decrease) Fair Value, Measurement with Unobservable Inputs Reconciliation, Liability, Transfers out of Level 3 EX-101.PRE 11 mtbc-20170930_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.8.0.1
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2017
Nov. 01, 2017
Document And Entity Information    
Entity Registrant Name MEDICAL TRANSCRIPTION BILLING, CORP  
Entity Central Index Key 0001582982  
Document Type 10-Q  
Document Period End Date Sep. 30, 2017  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   11,530,591
Trading Symbol MTBC  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2017  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Balance Sheets (Unaudited Sep 30, 2017) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
CURRENT ASSETS:    
Cash $ 2,789,382 $ 3,476,880
Accounts receivable - net of allowance for doubtful accounts of $268,000 and $156,000 at September 30, 2017 and December 31, 2016, respectively 3,535,673 4,330,901
Current assets - related party 25,203 13,200
Prepaid expenses and other current assets 758,785 618,501
Total current assets 7,109,043 8,439,482
Property and equipment - net 1,424,732 1,588,937
Intangible assets - net 2,997,211 5,833,706
Goodwill 12,263,943 12,178,868
Other assets 152,712 282,713
TOTAL ASSETS 23,947,641 28,323,706
CURRENT LIABILITIES:    
Accounts payable 1,017,774 1,905,131
Accrued compensation 848,571 2,009,911
Accrued expenses 758,357 1,236,609
Deferred rent (current portion) 79,150 61,437
Deferred revenue (current portion) 52,145 41,666
Accrued liability to related party 16,614 16,626
Borrowings under line of credit 2,000,000 2,000,000
Current portion of long-term debt 2,666,667
Notes payable - other (current portion) 246,603 5,181,459
Contingent consideration (current portion) 537,736 535,477
Dividend payable 638,905 202,579
Total current liabilities 6,195,855 15,857,562
Long - term debt, net of discount and debt issuance costs 4,033,668
Notes payable - other 137,550 166,184
Deferred rent 371,273 433,186
Deferred revenue 30,001 26,673
Contingent consideration 131,957 394,072
Deferred tax liability 510,530 345,530
Total liabilities 7,377,166 21,256,875
COMMITMENTS AND CONTINGENCIES (Note 8)
SHAREHOLDERS' EQUITY:    
Preferred stock, par value $0.001 per share - authorized 2,000,000 shares; issued and outstanding 929,299 and 294,656 shares at September 30, 2017 and December 31, 2016, respectively 929 295
Common stock, $0.001 par value - authorized 19,000,000 shares; issued 12,271,390 and 10,792,352 shares at September 30, 2017 and December 31, 2016, respectively; outstanding, 11,530,591 and 10,051,553 shares at September 30, 2017 and December 31, 2016, respectively 12,272 10,793
Additional paid-in capital 40,985,992 26,038,063
Accumulated deficit (23,325,897) (17,944,230)
Accumulated other comprehensive loss (440,821) (376,090)
Less: 740,799 common shares held in treasury, at cost at September 30, 2017 and December 31, 2016 (662,000) (662,000)
Total shareholders' equity 16,570,475 7,066,831
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 23,947,641 $ 28,323,706
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Balance Sheets (Unaudited Sep 30, 2017) (Parenthetical) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]    
Allowance for doubtful accounts receivable $ 268,000 $ 156,000
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 2,000,000 2,000,000
Preferred stock, shares issued 929,299 294,656
Preferred stock, shares outstanding 929,299 294,656
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 19,000,000 19,000,000
Common stock, shares, issued 12,271,390 10,792,352
Common stock, shares, outstanding 11,530,591 10,051,553
Treasury stock, shares 740,799 740,799
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Income Statement [Abstract]        
NET REVENUE $ 7,513,592 $ 5,341,002 $ 23,518,416 $ 15,663,687
OPERATING EXPENSES:        
Direct operating costs 4,171,932 2,670,385 13,592,492 7,292,415
Selling and marketing 228,991 274,796 853,460 838,721
General and administrative 2,474,139 2,569,399 8,232,613 8,173,272
Research and development 249,045 174,876 843,294 575,059
Change in contingent consideration (196,882) 151,423 (607,978)
Depreciation and amortization 664,441 1,118,282 3,637,131 3,536,940
Restructuring charges 275,628
Total operating expenses 7,788,548 6,610,856 27,586,041 19,808,429
OPERATING LOSS (274,956) (1,269,854) (4,067,625) (4,144,742)
OTHER:        
Interest income 5,446 10,918 13,598 25,310
Interest expense (678,103) (176,527) (1,242,672) (486,481)
Other income (expense) - net 32,494 (13,933) 107,364 (40,447)
LOSS BEFORE INCOME TAXES (915,119) (1,449,396) (5,189,335) (4,646,360)
Income tax provision 65,000 45,309 192,332 126,236
NET LOSS (980,119) (1,494,705) (5,381,667) (4,772,596)
Preferred stock dividend 652,697 231,473 1,283,151 549,945
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (1,632,816) $ (1,726,178) $ (6,664,818) $ (5,322,541)
Loss per common share:        
Basic and diluted loss per share $ (0.14) $ (0.17) $ (0.62) $ (0.53)
Weighted-average basic and diluted shares outstanding 11,485,811 10,006,121 10,835,142 10,031,212
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Statement of Comprehensive Income [Abstract]        
NET LOSS $ (980,119) $ (1,494,705) $ (5,381,667) $ (4,772,596)
OTHER COMPREHENSIVE (LOSS) INCOME, NET OF TAX        
Foreign currency translation adjustment (a) [1] (33,880) 1,489 (64,731) 12,305
COMPREHENSIVE LOSS $ (1,013,999) $ (1,493,216) $ (5,446,398) $ (4,760,291)
[1] No tax effect has been recorded as the Company recorded a valuation allowance against the tax benefit from its foreign currency translation adjustments.
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Condensed Consolidated Statement of Shareholders' Equity (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($)
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Loss [Member]
Treasury (Common) Stock [Member]
Total
Balance at Dec. 31, 2016 $ 295 $ 10,793 $ 26,038,063 $ (17,944,230) $ (376,090) $ (662,000) $ 7,066,831
Balance, shares at Dec. 31, 2016 294,656 10,792,352          
Net loss (5,381,667) (5,381,667)
Foreign currency translation adjustment   (64,731)   (64,731)
Issuance of stock under the Amended and Restated Equity Incentive Plan $ 25 $ 267 (267) 25
Issuance of stock under the Amended and Restated Equity Incentive Plan, shares 24,750 266,663          
Stock-based compensation, net of cash settlements 907,160 907,160
Issuance of common stock, net of fees and expenses $ 1,000 1,971,065 1,972,065
Issuance of common stock, net of fees and expenses, shares 1,000,000          
Issuance of common stock held as contingent consideration $ 212 331,464 331,676
Issuance of common stock held as contingent consideration, shares 212,375          
Issuance of preferred stock, net of fees and expenses $ 609 13,021,658 13,022,267
Issuance of preferred stock, net of fees and expenses, shares 609,893          
Preferred stock dividends (1,283,151) (1,283,151)
Balance at Sep. 30, 2017 $ 929 $ 12,272 $ 40,985,992 $ (23,325,897) $ (440,821) $ (662,000) $ 16,570,475
Balance, shares at Sep. 30, 2017 929,299 12,271,390          
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.8.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
OPERATING ACTIVITIES:    
Net loss $ (5,381,667) $ (4,772,596)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 3,637,131 3,536,940
Deferred rent (38,544) (28,032)
Deferred revenue 13,807 (32,912)
Provision for doubtful accounts 357,671 205,289
Provision for deferred income taxes 165,000 114,893
Foreign exchange (gain) loss (27,145) 72,360
Interest accretion and write-off of deferred financing costs 672,998 145,038
Non-cash restructuring charges 17,001
Stock-based compensation expense 333,854 765,595
Change in contingent consideration 151,423 (607,978)
Acquisition settlements (26,296)
Changes in operating assets and liabilities:    
Accounts receivable 437,557 (160,523)
Other assets 107,532 211,651
Accounts payable and other liabilities (1,754,255) 90,843
Net cash used in operating activities (1,307,637) (485,728)
INVESTING ACTIVITIES:    
Capital expenditures (499,988) (319,870)
Cash paid for acquisitions (205,000) (1,425,000)
Net cash used in investing activities (704,988) (1,744,870)
FINANCING ACTIVITIES:    
Contingent consideration payments (79,603) (153,799)
Settlement of tax withholding obligations on stock issued to employees (195,912) (8,500)
Proceeds from issuance of common stock, net of placement costs 2,000,000
Proceeds from issuance of preferred stock, net of placement costs 13,484,552 1,270,528
Proceeds from long term debt, net of costs 1,908,141
Repayments of debt obligations (7,626,088) (554,002)
Repayment of Prudential obligation (5,000,000)
Proceeds from line of credit 7,000,000 6,000,000
Repayments of line of credit (7,000,000) (6,000,000)
Payment of registration statement and bank costs (335,239) (119,406)
Preferred stock dividends paid (846,825) (506,603)
Purchase of common shares (546,145)
Net cash provided by financing activities 1,400,885 1,290,214
EFFECT OF EXCHANGE RATE CHANGES ON CASH (75,758) 11,317
NET DECREASE IN CASH (687,498) (929,067)
CASH - Beginning of the period 3,476,880 8,039,562
CASH - End of period 2,789,382 7,110,495
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:    
Vehicle financing obtained 30,746 189,725
Contingent consideration resulting from acquisitions 678,368
Dividends declared, not paid 638,905 202,578
Purchase of prepaid insurance through assumption of note 298,698 313,577
SUPPLEMENTAL INFORMATION - Cash paid during the period for:    
Income taxes 9,513 32,816
Interest $ 599,950 $ 321,530
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.8.0.1
Organization and Business
9 Months Ended
Sep. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Business

1. Organization and Business

 

Medical Transcription Billing, Corp. (and together with its subsidiaries “MTBC” or the “Company”) is a healthcare information technology company that offers an integrated suite of proprietary cloud-based electronic health records and practice management solutions, together with related business services, to healthcare providers. The Company’s integrated services are designed to help customers increase revenues, streamline workflows and make better business and clinical decisions, while reducing administrative burdens and operating costs. The Company’s services include full-scale revenue cycle management, electronic health records, and other technology-driven practice management services for private and hospital-employed healthcare providers. MTBC has its corporate offices in Somerset, New Jersey and maintains account management teams in various US offices and operates facilities in Pakistan and Sri Lanka.

 

MTBC was founded in 1999 and incorporated under the laws of the State of Delaware in 2001. In 2004, MTBC formed MTBC Private Limited (or “MTBC Pvt. Ltd.”) a 99.9% majority-owned subsidiary of MTBC based in Pakistan. The remaining 0.01% of the shares of MTBC Pvt. Ltd. is owned by the founder and Chief Executive Officer of MTBC. MTBC formed MTBC-Europe Sp. z.o.o. (or “MTBC-Europe”), a wholly-owned subsidiary of MTBC based in Poland in 2015. In 2016, MTBC formed MTBC Acquisition Corp. (“MAC”), a Delaware corporation, in connection with its acquisition of substantially all the assets of MediGain, LLC and its subsidiary, Millennium Practice Management Associates, LLC (together “MediGain). MAC has a wholly-owned subsidiary in Sri Lanka, RCM MediGain Colombo, Pvt. Ltd. In conjunction with its continued growth of its offshore operations in Pakistan and Sri Lanka, in April 2017, MTBC began the winding down of its operations in India and Poland. These operations have been terminated and the subsidiaries are being liquidated.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.8.0.1
Liquidity
9 Months Ended
Sep. 30, 2017
Liquidity [Abstract]  
Liquidity

2. Liquidity

 

The Company previously adopted FASB Accounting Standard Codification (“ASC”) Topic 205-40, Presentation of Financial Statements – Going Concern, which requires that management evaluate whether there are relevant conditions and events that, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the financial statements are issued. Based upon the analysis set forth below, management believes there is no longer substantial doubt about the Company’s ability to continue as a going concern and to meet the obligations as they become due within the next twelve months.

 

As part of the evaluation, management considered that on September 30, 2017, the Company had $2.8 million of cash and had positive working capital of $913,000. The loss before income taxes was $915,000 for the three months ended September 30, 2017, of which $664,000 represents non-cash depreciation and amortization and $463,000 of non-cash financing costs, which were written off as a result of the termination of the Opus Bank (“Opus”) credit agreement.

 

During the second and third quarter of 2017, the Company raised a total of $15.0 million in net proceeds from a series of equity financings. In May 2017, the Company completed a registered direct offering of one million shares of its common stock at $2.30 per share, raising net proceeds of approximately $2.0 million. Between June and September 2017, the Company completed five public offerings of approximately 610,000 shares of its 11% Series A Cumulative Redeemable Perpetual Preferred Stock (the “Preferred Stock”) at $25.00 per share, raising net proceeds of approximately $13.0 million.

 

These equity financings improved the financial position of the Company and allowed us to repay the amount owed to Prudential during the third quarter. As a result of the common and preferred stock offerings, the Company’s cash position and the working capital deficit at the end of the second quarter improved to positive net working capital of $913,000 at the end of the third quarter. At September 30, 2017, the total amount outstanding under the Opus credit line was $2 million and the Company has $2.8 million of cash. In October 2017, the Company entered into a new credit facility with Silicon Valley Bank (“SVB”) and repaid and terminated its previous facility with Opus. The SVB credit facility is a $5 million secured revolving line of credit where borrowings are based on a formula of 200% of repeatable revenue adjusted by an annualized attrition rate as defined in the credit facility agreement. Under the SVB credit facility agreement, the facility currently available to the Company is in excess of $4 million. Management continues to focus on the Company’s overall profitability, including growing revenue and managing expenses, and expects that these efforts will continue to enhance our liquidity and financial position. The Company forecasts that cash flow from operations over the next 12 months will be positive and provide sufficient liquidity to the Company. Management has based its expectations on assumptions that may prove to be wrong.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.8.0.1
Basis of Presentation
9 Months Ended
Sep. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation

3. BASIS OF PRESENTATION

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by Regulation S-X, Rule 8-03. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the Company’s financial position as of September 30, 2017, the results of operations for the three and nine months ended September 30, 2017 and 2016 and cash flows for the nine months ended September 30, 2017 and 2016. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates.

 

The condensed consolidated balance sheet as of December 31, 2016 was derived from our audited consolidated financial statements. The accompanying unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2016, which are included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2017.

 

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

 

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606). The core principle of this amendment is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09, as amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12 and ASU 2016-20, is effective for annual reporting periods beginning after December 15, 2017, and interim periods therein. These ASUs can be adopted either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. The Company plans to adopt Topic 606 using the modified retrospective method when it becomes effective for the Company in the first quarter of 2018. We have assigned internal resources to assist in the evaluation of the potential impacts of this amendment. Implementation efforts to date have included a review of revenue agreements and the performance obligations contained therein, and review of our commercial terms and practices across our revenue streams and a comparison of our current revenue recognition procedures to those required under Topic 606. While the Company is continuing to assess the effects of the amendment, management currently believes that the new guidance will not have a material impact on our revenue recognition policies, practices or systems. The Company is continuing to evaluate the effect that Topic 606 will have on its consolidated financial statements and related disclosures, and preliminary assessments are subject to change. We are in the process of finalizing the analysis of the requirements under Topic 606 and quantifying the effects if any, from the implementation which should be completed during the fourth quarter of 2017.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard will require organizations that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP — which requires only capital leases to be recognized on the balance sheet — the new ASU will require both types of leases to be recognized on the balance sheet. The amendments in this ASU are effective for financial statements issued for annual periods beginning after December 15, 2018 with earlier adoption permitted. The Company is currently evaluating the impact of this new standard.

 

In January 2017, the FASB issued ASU No. 2017-01 Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASU clarifies the definition of a business with the objective of adding guidance to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or business. The amendments in this ASU provide a more robust framework to use in determining when a set of assets and activities is a business. The amendments provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The ASU is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. Upon adoption, the Company will apply the guidance in this ASU when evaluating whether acquired assets and activities constitute a business.

 

Also in January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. The ASU modifies the accounting for goodwill impairment with the objective of simplifying the process of determining impairment levels. Specifically, the amendments in the ASU eliminate a step in the goodwill impairment test which requires companies to develop a hypothetical purchase price allocation when analyzing goodwill impairment. This eliminates the need for companies to estimate the fair value of individual existing assets and liabilities within a reporting unit. Instead, goodwill impairment will now be the amount by which a reporting unit’s total carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other aspects of the goodwill impairment test process have remained the same. The ASU is effective for annual periods beginning in the year 2020, with early adoption permitted for any impairment tests after January 1, 2017. The Company has elected to early adopt ASU 2017-04. There is currently no impact on the condensed consolidated financial statements as a result of this adoption.

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation: Scope of Modification Accounting (Topic 718), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity will account for the effects of a modification unless the fair value of the modified award is the same as the original award, the vesting conditions of the modified award are the same as the original award and the classification of the modified award as an equity instrument or liability instrument is the same as the original award. The guidance is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The update is to be adopted prospectively to an award modified on or after the adoption date. Early adoption is permitted. The Company is currently evaluating the effect of this update but does not believe it will have a material impact on its consolidated financial statements and related disclosures.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.8.0.1
Acquisitions
9 Months Ended
Sep. 30, 2017
Business Combinations [Abstract]  
Acquisitions

4. ACQUISITIONS

 

2017 Acquisition

 

Effective July 1, 2017, the Company purchased substantially all of the assets of Washington Medical Billing, LLC (“WMB”), a Washington limited liability company. In accordance with the asset purchase agreement, the Company agreed to a non-refundable initial payment (the “Initial Payment Amount”) of $205,000. In addition to the Initial Payment Amount, the Company agreed to pay the sellers 22%, 23% and 24% of revenue collected from the WMB accounts in the first, second and third year, respectively, subsequent to the acquisition date to the extent such amounts in the aggregate exceed the Initial Payment Amount (the “WMB Installment Payments”). The WMB Installment Payments are to be paid quarterly commencing October, 2017. Based on the Company’s revenue forecast, it does not appear that there will be any WMB Installment Payments and therefore the preliminary aggregate purchase price of WMB was determined to be $205,000.

 

The preliminary purchase price allocation for WMB was performed by the Company and is summarized as follows:

 

Customer relationships   $ 120,000  
Goodwill     85,000  
    $ 205,000  

 

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

 

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

 

Revenue earned from the WMB acquisition was approximately $165,000 during the quarter ended September 30, 2017.

 

2016 Acquisitions

 

On February 15, 2016 (the “GCB Closing Date”), the Company entered into an asset purchase agreement with Gulf Coast Billing, Inc. (“GCB”), pursuant to which the Company purchased substantially all of the assets of GCB. The aggregate final purchase price for GCB was $1,480,000 which consisted of cash of $1,250,000 and contingent consideration of $230,000. During the quarter ended June 30, 2017, an agreement was reached with GCB that no additional contingent consideration will be paid.

 

On May 2, 2016 (the “RMB Closing Date”), the Company entered into an asset purchase agreement with Renaissance Medical Billing, LLC (“RMB”), pursuant to which the Company purchased substantially all of the assets of RMB. In accordance with the RMB asset purchase agreement, the Company paid $175,000 in initial cash consideration (“RMB Initial Payment”), on the RMB Closing Date. In addition, the Company will pay RMB twenty-seven percent (27%) of the revenue earned and received from the acquired RMB accounts for three years, less the RMB Initial Payment which will be deducted in full from the required payments (the “RMB Installment Payments”) before any additional payment is made to the seller. The aggregate purchase price for RMB was $325,000 which consisted of cash of $175,000 and contingent consideration of $150,000. Through September 30, 2017, approximately $24,000 of contingent consideration payments have been made.

 

Effective July 1, 2016 (the “WFS Closing Date”), the Company entered into an asset purchase agreement with WFS Services, Inc. (“WFS”), pursuant to which the Company purchased substantially all of the assets of WFS. In accordance with the WFS asset purchase agreement, the Company did not pay any initial cash consideration on the WFS Closing Date but will make monthly payments of $5,000 for three years beginning July, 2016 subject to proportionate adjustment if annualized revenues decrease below a threshold specified in the APA. In addition, each quarter the Company will pay WFS fifty percent (50%) of Adjusted EBITDA, as defined in the WFS asset purchase agreement, generated from the WFS customer accounts acquired for three years. The aggregate purchase price of WFS was determined to be $298,000, which was recorded as contingent consideration. Through September 30, 2017, $60,000 of contingent consideration payments have been made.

 

On October 3, 2016, MAC acquired substantially all of the assets of MediGain. Since MediGain was in default of its obligations to Prudential prior to the acquisition, MAC purchased 100% of MediGain’s senior secured debt from Prudential.

 

The debt was collateralized by substantially all of MediGain’s assets, so immediately after purchasing the debt, MAC entered into a strict foreclosure agreement with MediGain transferring substantially all the assets (including accounts receivable, fixed assets, client relationships, and MediGain’s wholly-owned subsidiaries in India and Sri Lanka) to MAC in satisfaction of the outstanding obligations under the senior secured notes. The aggregate purchase price was $7 million which consisted of $2 million in cash paid at closing and $5 million, plus interest, which was paid during the third quarter of 2017.

 

MediGain, GCB, RMB and WFS are collectively referred to as the “2016 Acquisitions.” Revenue earned from the 2016 Acquisitions was approximately $4.1 million and $12.8 million during the three and nine months ended September 30, 2017, respectively.

 

Pro forma financial information (Unaudited)

 

The unaudited pro forma information below represents condensed consolidated results of operations as if the 2016 Acquisitions and the WMB Acquisition occurred on January 1, 2016. The pro forma information has been included for comparative purposes and is not indicative of results of operations of the Company would have had if the acquisitions occurred on the above date, nor is it necessarily indicative of future results.

 

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2017     2016     2017     2016  
    ($ in thousands, except per share data)  
Total revenue   $ 7,514     $ 9,984     $ 24,036     $ 32,895  
Net loss attributable to common shareholders   $ (1,581 )   $ (4,316 )   $ (6,584 )   $ (13,830 )
Net loss per common share   $ (0.14 )   $ (0.43 )   $ (0.61 )   $ (1.38 )

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.8.0.1
Goodwill and Intangible Assets-Net
9 Months Ended
Sep. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Intangible Assets-Net

  5. GOODWILL AND INTANGIBLE ASSETS-NET

 

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. The following is the summary of the changes to the carrying amount of goodwill for the nine months ended September 30, 2017 and the year ended December 31, 2016:

 

    September 30, 2017     December 31, 2016  
Beginning gross balance   $ 12,178,868     $ 8,971,994  
Acquisitions     85,075       3,206,874  
Ending gross balance   $ 12,263,943     $ 12,178,868  

 

Intangible assets include customer contracts and relationships and covenants not-to-compete acquired in connection with acquisitions, as well as software purchase and development costs and trademarks acquired. Intangible assets - net as of September 30, 2017 and December 31, 2016 consist of the following:

 

    September 30, 2017     December 31, 2016  
Contracts and relationships acquired   $ 16,491,300     $ 16,371,375  
Non-compete agreements     1,236,377       1,236,377  
Other intangible assets     1,482,864       1,289,339  
Total intangible assets     19,210,541       18,897,091  
Less: Accumulated amortization     (16,213,330 )     (13,063,385 )
Intangible assets - net   $ 2,997,211     $ 5,833,706  

 

Amortization expense was approximately $3.2 million for both the nine months ended September 30, 2017 and 2016, and $508,000 and $1.0 million for the three months ended September 30, 2017 and 2016, respectively. The weighted-average amortization period is three years.

 

As of September 30, 2017, future amortization expense scheduled to be expensed is as follows:

 

Years ending        
December 31        
2017 (three months)     $ 493,264  
2018       1,601,110  
2019       827,033  
2020       75,804  
Total     $ 2,997,211  

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.8.0.1
Net Loss Per Common Share
9 Months Ended
Sep. 30, 2017
Loss per common share:  
Net Loss Per Common Share

  6. NET LOss per COMMON share

 

The following table presents the weighted-average shares outstanding for basic and diluted net loss per share for the three and nine months ended September 30, 2017 and 2016:

 

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
      2017       2016       2017       2016  
Basic and Diluted:                                
Net loss attributable to common shareholders   $ (1,632,816 )   $ (1,726,178 )   $ (6,664,818 )   $ (5,322,541 )
Weighted average shares applicable to common shareholders used in computing basic and diluted loss per share     11,485,811       10,006,121       10,835,142       10,031,212  
Net loss attributable to common shareholders per share - Basic and Diluted   $ (0.14 )   $ (0.17 )   $ (0.62 )   $ (0.53 )

 

All unvested restricted share units (“RSUs”), the 200,000 warrants granted to Opus in 2015 and 2016 and the two million warrants issued during the second quarter of 2017 as part of the sale of common stock have been excluded from the above calculations as they were anti-dilutive. Vested RSUs and vested restricted shares have been included in the above calculations.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.8.0.1
Debt
9 Months Ended
Sep. 30, 2017
Debt Disclosure [Abstract]  
Debt

  7. Debt

 

Opus — On September 2, 2015, the Company entered into a credit agreement with Opus. Opus extended a credit facility totaling $10 million to the Company, inclusive of $8 million of term loans and a $2 million revolving line of credit. The Company’s obligations to Opus were secured by substantially all of the Company’s domestic assets and 65% of the shares in its offshore subsidiaries. During October 2017, the Opus credit facility was replaced. See Note 15.

 

Interest expense in the consolidated statements of operations for both the three and nine months ended September 30, 2017 includes $463,000 of deferred financing costs which were written off as a result of the termination of the Opus credit agreement.

 

Prudential Deferred Purchase Price — During the current quarter, the entire amount due to Prudential of $5 million was paid, including $270,000 of accrued interest, which fully satisfied the amount owed.

 

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

 

Insurance Financing — The Company finances certain insurance purchases over the term of the policy life. The interest rate charged is 5.25%.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies
9 Months Ended
Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

  8. Commitments and Contingencies

 

Legal Proceedings — The Company is subject to legal proceedings and claims which have arisen in the ordinary course of business and have not been fully adjudicated. These actions, when ultimately concluded and determined, will not, in the opinion of management, have a material adverse effect upon the consolidated financial position, results of operations, or cash flows of the Company.

 

Leases — The Company leases certain office space and other facilities under operating leases expiring through 2021. Certain of these leases contain renewal options.

 

Future minimum lease payments under non-cancelable operating leases for office space as of September 30, 2017 are as follows:

 

Years Ending      
December 31   Total  
2017 (three months)   $ 68,994  
2018     304,357  
2019     163,179  
Total   $ 536,530  

 

Total rental expense, included in direct operating costs and general and administrative expense in the condensed consolidated statements of operations, amounted to approximately $690,000 and $581,000 for the nine months ended September 30, 2017 and 2016, respectively, and approximately $237,000 and $202,000 for the three months ended September 30, 2017 and 2016, respectively.

 

Acquisitions — In connection with some of the Company’s acquisitions, contingent consideration as of September 30, 2017 is payable in the form of cash with payment terms through 2019. Depending on the terms of the agreement, if the performance measures are not achieved, the Company may pay less than the recorded amount, and if the performance measures are exceeded, the Company may pay more than the recorded amount.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.8.0.1
Shareholders' Equity Transactions
9 Months Ended
Sep. 30, 2017
Equity [Abstract]  
Shareholders' Equity Transactions

  9. SHAREHOLDERS’ EQUITY TRANSACTIONS

 

In August 2017, the Company completed two public preferred stock offerings whereby a total of 60,195 shares of its Preferred Stock were sold at $25.00 per share. As a result of this sale, the Company received net proceeds of approximately $1.3 million. In September 2017, the Company completed two public preferred stock offerings whereby a total of 255,000 shares of its Preferred Stock were sold at $25.00 per share. As a result of this sale, the Company received net proceeds of approximately $5.6 million. Dividends on the Preferred Stock of $2.75 annually per share are cumulative from the date of issue and are payable each month when, as and if declared by the Company’s Board of Directors. As of September 30, 2017, the Board of Directors has declared monthly dividends on the Preferred Stock payable through November 2017.

 

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

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Parties
9 Months Ended
Sep. 30, 2017
Related Party Transactions [Abstract]  
Related Parties

  10. Related PARTIES

 

The Company had sales to a related party, a physician who is the wife of the CEO. Revenues from this customer were approximately $12,000 and $13,000 for the nine months ended September 30, 2017 and 2016, respectively, and approximately $4,000 and $5,000 for the three months ended September 30, 2017 and 2016, respectively. As of September 30, 2017 and December 31, 2016, the receivable balance due from this customer was approximately $1,500 and $1,600, respectively.

 

The Company is a party to a nonexclusive aircraft dry lease agreement with Kashmir Air, Inc. (“KAI”), which is owned by the CEO. The Company recorded an expense of approximately $96,000 for both the nine months ended September 30, 2017 and 2016 and approximately $32,000 for both the three months ended September 30, 2017 and 2016. As of September 30, 2017 and December 31, 2016, the Company had a liability outstanding to KAI of approximately $17,000, which is included in accrued liability to related party in the condensed consolidated balance sheets.

 

The Company leases its corporate offices, temporary housing for its foreign visitors and a storage facility in New Jersey and its backup operations center in Bagh, Pakistan, from the CEO. The related party rent expense for the nine months ended September 30, 2017 and 2016 was approximately $141,000 and $131,000, respectively, and $47,000 and $43,000 for the three months ended September 30, 2017 and 2016, respectively, and is included in direct operating costs and general and administrative expense in the condensed consolidated statements of operations. Current assets-related party on the consolidated balance sheets includes security deposits related to the leases of the Company’s corporate offices in the amount of approximately $13,000 as of both September 30, 2017 and December 31, 2016. The September 30, 2017 balance also includes prepaid rent paid to the CEO of approximately $12,000.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock-Based Compensation
9 Months Ended
Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

  11. STOCK-BASED COMPENSATION

 

In April 2014, the Company adopted the Medical Transcription Billing, Corp. 2014 Equity Incentive Plan (the “2014 Plan”), reserving a total of 1,351,000 shares of common stock for grants to employees, officers, directors and consultants. During April 2017, the 2014 Plan was amended whereby an additional 1,500,000 shares of common stock and 100,000 shares of Preferred Stock were added to the plan for future issuance. The name of the 2014 Plan was changed to the Amended and Restated Equity Incentive Plan (the “Incentive Plan”). As of September 30, 2017, 1,238,734 shares of common stock and 67,000 shares of Preferred Stock are available for grant. Permissible awards include incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance stock and cash-settled awards and other stock-based awards in the discretion of the Compensation Committee of the Board of Directors including unrestricted stock grants.

 

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

 

During the third quarter of 2017, a total of 200,000 RSUs were granted equally to the four outside members of the Board of directors and a total of 300,000 RSUs were granted equally to three executive officers. The RSUs vest over the next two years, at six month intervals.

 

The Company recognizes compensation expense on a straight-line basis over the total requisite service period for the entire award. For stock awards classified as equity, the market price of our common or Preferred Stock on the date of grant is used in recording the fair value of the award. For stock awards classified as a liability, the earned amount is marked to market based on the end of period common stock price. The following table summarizes the components of share-based compensation expense for the three and nine months ended September 30, 2017 and 2016:

 

Stock-based compensation included in the Condensed   Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
Consolidated Statement of Operations:   2017     2016     2017     2016  
Direct operating costs   $ 1,705     $ 3,571     $ 7,162     $ 8,909  
General and administrative     124,789       131,077       318,870       731,690  
Research and development     (675 )     3,767       7,822       6,910  
Selling and marketing     -       5,378       -       18,086  
Total stock-based compensation expense   $ 125,819     $ 143,793     $ 333,854     $ 765,595  

 

The following table summarizes the RSU and restricted stock transactions related to the common stock under the Incentive Plan for the nine months ended September 30, 2017:

 

Outstanding and unvested at January 1, 2017     406,959  
Granted     528,000  
Vested     (327,159 )
Forfeited     (29,331 )
Outstanding and unvested at September 30, 2017     578,469  

 

Of the total outstanding and unvested at September 30, 2017, 548,334 RSUs and restricted stock awards are classified as equity and 30,135 RSUs are classified as a liability.

 

The liability for the cash-settled awards was approximately $17,000 and $31,000 at September 30, 2017 and December 31, 2016, respectively, and is included in accrued compensation in the condensed consolidated balance sheets.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.8.0.1
Income Taxes
9 Months Ended
Sep. 30, 2017
Income Tax Disclosure [Abstract]  
Income Taxes

  12. INCOME TAXES

 

The deferred income tax provision for the nine months ended September 30, 2017 and 2016 primarily relates to the amortization of goodwill.

 

Although the Company is forecasting a return to profitability, it has incurred cumulative losses which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Accordingly, a valuation allowance has been recorded against all Federal and state deferred tax assets as of September 30, 2017 and December 31, 2016. Some of the Federal NOL carry forward is currently subject to certain utilization limitations under Section 382 of the Internal Revenue Code.

 

The Company’s plan to repatriate earnings in its foreign locations to the United States requires that U.S. federal income taxes be provided on the Company’s earnings in those foreign locations. For state tax purposes, the Company’s foreign earnings generally are not taxed due to an exemption available in states where the Company currently transacts business.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.8.0.1
Restructuring Charges
9 Months Ended
Sep. 30, 2017
Restructuring and Related Activities [Abstract]  
Restructuring Charges

  13. RESTRUCTURING CHARGES

 

During March 2017, the Company decided to close its operations in Poland and India. In connection with the closing of these subsidiaries, in the first quarter of 2017, the Company expensed approximately $276,000 of restructuring charges representing primarily employee severance costs, remaining lease and termination fees, disposal of property and equipment and professional fees. The remaining amounts to be paid of approximately $19,000 are included in accrued expenses in the condensed consolidated balance sheet as of September 30, 2017.

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.8.0.1
Fair Value of Financial Instruments
9 Months Ended
Sep. 30, 2017
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

  14. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

As of September 30, 2017 and December 31, 2016, the carrying amounts of receivables, accounts payable, accrued expenses and the amount due to Prudential (at December 31, 2016 only) approximated their estimated fair values because of the short term nature of these financial instruments.

 

Fair value measurements-Level 2

Our notes payable are carried at cost and approximate fair value since the interest rates being charged approximate market rates. The fair value of our term loans at December 31, 2016 was approximately $7.3 million. The Company’s outstanding borrowings under the line of credit with Opus had a carrying value of $2 million as of both September 30, 2017 and December 31, 2016. The fair value of the outstanding borrowings with Opus under the term loans at December 31, 2016 and the line of credit at December 31, 2016 and September 30, 2017 approximated the carrying value, as these borrowings bore interest based on prevailing variable market rates currently available at those dates. As a result, the Company categorizes these borrowings as Level 2 in the fair value hierarchy.

 

Contingent Consideration

The Company’s contingent consideration of approximately $670,000 and $930,000 as of September 30, 2017 and December 31, 2016, respectively, are Level 3 liabilities. The fair value of the contingent consideration at September 30, 2017 and December 31, 2016 was primarily driven by changes in revenue estimates related to the acquisitions during 2015 and 2016, the price of the Company’s common stock on the Nasdaq Capital Market (only for the December 31, 2016 contingent consideration amount), the passage of time and the associated discount rate. Due to the number of factors used to determine contingent consideration, it is not possible to determine a range of outcomes. Subsequent adjustments to the fair value of the contingent consideration liability will continue to be recorded in the Company’s results of operations until all contingencies are settled.

 

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

 

    Fair Value Measurement at Reporting
Date Using Significant Unobservable
Inputs, Level 3
 
    Nine Months Ended September 30,  
    2017     2016  
Balance - January 1,   $ 929,549     $ 1,172,508  
Acquisitions     -       678,368  
Change in fair value     151,423       (607,978 )
Settlement in the form of shares issued     (331,676 )     -  
Payments     (79,603 )     (153,799 )
Balance - September 30,   $ 669,693     $ 1,089,099  

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Event
9 Months Ended
Sep. 30, 2017
Subsequent Events [Abstract]  
Subsequent Event

15. SUBSEQUENT EVENT

 

During October 2017, the Opus credit facility was replaced with a $5 million revolving line of credit from SVB. Interest on the SVB revolving line of credit is charged at the prime rate plus 1.75%. There is also a fee of one-half of 1% for the unused portion of the credit line. Available borrowings are subject to 200% of repeatable revenue as defined, reduced by an annualized attrition rate. The debt is secured by all of the Company’s domestic assets and 65% of the shares in its offshore facilities. Future acquisitions are subject to approval by SVB.

 

In connection with the SVB debt agreement, the Company paid approximately $90,000 of fees upfront and issued warrants for SVB to purchase 125,000 shares of its common stock, and committed to pay an annual anniversary fee of $50,000 a year. The warrants have a strike price equal to the highest volume weighted average price per share for any five consecutive trading days during the thirty consecutive trading-day period commencing on the fifteenth trading day immediately preceding the date of the loan agreement. They have a five-year exercise window, piggyback registration and net exercise rights, and will be valued once the strike price is determined. The SVB credit agreement contains various covenants and conditions governing the revolving line of credit.

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.8.0.1
Acquisitions (Tables)
9 Months Ended
Sep. 30, 2017
Business Combinations [Abstract]  
Schedule of Business Acquisitions, by Acquisition

The preliminary purchase price allocation for WMB was performed by the Company and is summarized as follows:

 

Customer relationships   $ 120,000  
Goodwill     85,000  
    $ 205,000  

Business Acquisition, Pro Forma Information

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2017     2016     2017     2016  
    ($ in thousands, except per share data)  
Total revenue   $ 7,514     $ 9,984     $ 24,036     $ 32,895  
Net loss attributable to common shareholders   $ (1,581 )   $ (4,316 )   $ (6,584 )   $ (13,830 )
Net loss per common share   $ (0.14 )   $ (0.43 )   $ (0.61 )   $ (1.38 )

XML 35 R24.htm IDEA: XBRL DOCUMENT v3.8.0.1
Goodwill and Intangible Assets-Net (Tables)
9 Months Ended
Sep. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Intangible Assets and Goodwill

Goodwill consists of the excess of the purchase price over the fair value of identifiable net assets of businesses acquired. The following is the summary of the changes to the carrying amount of goodwill for the nine months ended September 30, 2017 and the year ended December 31, 2016:

 

    September 30, 2017     December 31, 2016  
Beginning gross balance   $ 12,178,868     $ 8,971,994  
Acquisitions     85,075       3,206,874  
Ending gross balance   $ 12,263,943     $ 12,178,868  

Schedule of Finite-Lived Intangible Assets

Intangible assets include customer contracts and relationships and covenants not-to-compete acquired in connection with acquisitions, as well as software purchase and development costs and trademarks acquired. Intangible assets - net as of September 30, 2017 and December 31, 2016 consist of the following:

 

    September 30, 2017     December 31, 2016  
Contracts and relationships acquired   $ 16,491,300     $ 16,371,375  
Non-compete agreements     1,236,377       1,236,377  
Other intangible assets     1,482,864       1,289,339  
Total intangible assets     19,210,541       18,897,091  
Less: Accumulated amortization     (16,213,330 )     (13,063,385 )
Intangible assets - net   $ 2,997,211     $ 5,833,706  

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

As of September 30, 2017, future amortization expense scheduled to be expensed is as follows:

 

Years ending        
December 31        
2017 (three months)     $ 493,264  
2018       1,601,110  
2019       827,033  
2020       75,804  
Total     $ 2,997,211  

XML 36 R25.htm IDEA: XBRL DOCUMENT v3.8.0.1
Net Loss Per Common Share (Tables)
9 Months Ended
Sep. 30, 2017
Loss per common share:  
Schedule of Losses Per Share, Basic and Diluted

The following table presents the weighted-average shares outstanding for basic and diluted net loss per share for the three and nine months ended September 30, 2017 and 2016:

 

    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
      2017       2016       2017       2016  
Basic and Diluted:                                
Net loss attributable to common shareholders   $ (1,632,816 )   $ (1,726,178 )   $ (6,664,818 )   $ (5,322,541 )
Weighted average shares applicable to common shareholders used in computing basic and diluted loss per share     11,485,811       10,006,121       10,835,142       10,031,212  
Net loss attributable to common shareholders per share - Basic and Diluted   $ (0.14 )   $ (0.17 )   $ (0.62 )   $ (0.53 )

XML 37 R26.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies (Tables)
9 Months Ended
Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Future Minimum Lease Payments Under Non-cancelable Operating Leases

Future minimum lease payments under non-cancelable operating leases for office space as of September 30, 2017 are as follows:

 

Years Ending      
December 31   Total  
2017 (three months)   $ 68,994  
2018     304,357  
2019     163,179  
Total   $ 536,530  

XML 38 R27.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock-Based Compensation (Tables)
9 Months Ended
Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

The following table summarizes the components of share-based compensation expense for the three and nine months ended September 30, 2017 and 2016:

 

Stock-based compensation included in the Condensed   Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
Consolidated Statement of Operations:   2017     2016     2017     2016  
Direct operating costs   $ 1,705     $ 3,571     $ 7,162     $ 8,909  
General and administrative     124,789       131,077       318,870       731,690  
Research and development     (675 )     3,767       7,822       6,910  
Selling and marketing     -       5,378       -       18,086  
Total stock-based compensation expense   $ 125,819     $ 143,793     $ 333,854     $ 765,595  

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award

The following table summarizes the RSU and restricted stock transactions related to the common stock under the Incentive Plan for the nine months ended September 30, 2017:

 

Outstanding and unvested at January 1, 2017     406,959  
Granted     528,000  
Vested     (327,159 )
Forfeited     (29,331 )
Outstanding and unvested at September 30, 2017     578,469  

XML 39 R28.htm IDEA: XBRL DOCUMENT v3.8.0.1
Fair Value of Financial Instruments (Tables)
9 Months Ended
Sep. 30, 2017
Fair Value Disclosures [Abstract]  
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

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

 

    Fair Value Measurement at Reporting
Date Using Significant Unobservable
Inputs, Level 3
 
    Nine Months Ended September 30,  
    2017     2016  
Balance - January 1,   $ 929,549     $ 1,172,508  
Acquisitions     -       678,368  
Change in fair value     151,423       (607,978 )
Settlement in the form of shares issued     (331,676 )     -  
Payments     (79,603 )     (153,799 )
Balance - September 30,   $ 669,693     $ 1,089,099  

XML 40 R29.htm IDEA: XBRL DOCUMENT v3.8.0.1
Organization and Business (Details Narrative)
Sep. 30, 2017
Chief Executive Officer [Member]  
Equity method investment, ownership percentage in majority-owned subsidiary based in Pakistan 0.01%
MTBC [Member]  
Equity method investment, ownership percentage in majority-owned subsidiary based in Pakistan 99.90%
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.8.0.1
Liquidity (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 9 Months Ended
May 31, 2017
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Dec. 31, 2015
Cash   $ 2,789,382 $ 7,110,495 $ 2,789,382 $ 7,110,495 $ 3,476,880 $ 8,039,562
Working capital surplus   913,000   913,000      
Net loss before taxes   915,119 1,449,396 5,189,335 4,646,360    
Depreciation and amortization expenses   664,441 $ 1,118,282 3,637,131 3,536,940    
Non cash financing cost   463,000          
Proceeds from a series of equity financings       15,000,000      
Net proceeds from issuance of common stock       2,000,000    
Opus Credit Facility [Member]              
Line of credit   2,000,000   2,000,000      
SVB Credit Facility Agreement [Member] | October 2017 [Member]              
Line of credit   4,000,000   4,000,000      
Line of credit facility Maximum borrowing capacity   $ 5,000,000   $ 5,000,000      
Revolving line of credit secured on repeatable revenue percentage   200.00%   200.00%      
11% Series A Cumulative Redeemable Preferred Stock [Member]              
Number of stock shares issued during the period       610,000      
Shares issued price per share   $ 25.00   $ 25.00      
Net proceeds from issuance of preferred stock       $ 13,000,000      
Common Stock [Member]              
Number of stock shares issued during the period 1,000,000     1,000,000      
Shares issued price per share $ 2.30            
Net proceeds from issuance of common stock $ 2,000,000            
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.8.0.1
Acquisitions (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Jul. 01, 2017
Oct. 03, 2016
Jul. 01, 2016
May 02, 2016
Sep. 30, 2017
Sep. 30, 2017
Feb. 15, 2016
Payments to acquire business           $ 205,000  
Weighted-average amortization period of acquired intangible assets           3 years  
Revenue earned from the WMB acquisition           $ 165,000  
MediGain [Member]              
Purchase of percentage of senior secured debt   100.00%          
Purchase price for acquisition   $ 7,000,000          
Purchase price paid at closing   $ 2,000,000          
Purchase price paid during 2017         $ 5,000,000    
Washington Medical Billing, LLC [Member] | First Year [Member] | Revenue Collected from WMB Accounts [Member]              
Installment payments percentage 22.00%            
Washington Medical Billing, LLC [Member] | Second Year [Member] | Revenue Collected from WMB Accounts [Member]              
Installment payments percentage 23.00%            
Washington Medical Billing, LLC [Member] | Third Year [Member] | Revenue Collected from WMB Accounts [Member]              
Installment payments percentage 24.00%            
Gulf Coast Billing Inc [Member]              
Business combination, recognized identifiable assets acquired and liabilities assumed, liabilities, total             $ 1,480,000
Business combination, recognized identifiable assets acquired and liabilities assumed, cash and equivalents paid             1,250,000
Business combination, contingent consideration             $ 230,000
2016 Acquisitions [Member]              
Revenues         $ 4,100,000 $ 12,800,000  
Asset Purchase Agreement [Member] | Washington Medical Billing, LLC [Member]              
Non-refundable initial payment amount $ 205,000            
Asset Purchase Agreement [Member] | Renaissance Medical Billing, LLC [Member]              
Business combination, recognized identifiable assets acquired and liabilities assumed, liabilities, total       $ 325,000      
Business combination, recognized identifiable assets acquired and liabilities assumed, cash and equivalents paid       175,000      
Business combination, contingent consideration       150,000      
Initial cash consideration       $ 175,000      
Future payment as a percentage of revenue       27.00%      
Contingent consideration paid since acquisition through September 30, 2017       $ 24,000      
Asset Purchase Agreement [Member] | WFS Services, Inc. [Member]              
Business combination, recognized identifiable assets acquired and liabilities assumed, liabilities, total     $ 298,000        
Business combination, contingent consideration     298,000        
Contingent consideration paid since acquisition through September 30, 2017     60,000        
Required monthly payments     $ 5,000        
Future payment as a percentage of EBITDA     50.00%        
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.8.0.1
Acquisitions - Schedule of Business Acquisitions, by Acquisition (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Goodwill $ 12,263,943 $ 12,178,868
WMB [Member]    
Customer relationships 120,000  
Goodwill 85,000  
Total $ 205,000  
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.8.0.1
Acquisitions - Business Acquisition, Pro Forma Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Business Combinations [Abstract]        
Total revenue $ 7,514 $ 9,984 $ 24,036 $ 32,895
Net loss attributable to common shareholders $ (1,581) $ (4,316) $ (6,584) $ (13,830)
Net loss per common share $ (0.14) $ (0.43) $ (0.61) $ (1.38)
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.8.0.1
Goodwill and Intangible Assets-Net (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]        
Amortization expenses $ 508,000 $ 1,000,000 $ 3,200,000 $ 3,200,000
Weighted-average amortization period     3 years  
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.8.0.1
Goodwill and Intangible Assets-Net - Schedule of Intangible Assets and Goodwill (Details) - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]    
Beginning gross balance $ 12,178,868 $ 8,971,994
Acquisitions 85,075 3,206,874
Ending gross balance $ 12,263,943 $ 12,178,868
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.8.0.1
Goodwill and Intangible Assets-Net - Schedule of Finite-Lived Intangible Assets (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Total intangible assets $ 19,210,541 $ 18,897,091
Less: Accumulated amortization (16,213,330) (13,063,385)
Intangible assets- net 2,997,211 5,833,706
Contracts and Relationships Acquired [Member]    
Total intangible assets 16,491,300 16,371,375
Non-Compete Agreements [Member]    
Total intangible assets 1,236,377 1,236,377
Other Intangible Assets [Member]    
Total intangible assets $ 1,482,864 $ 1,289,339
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.8.0.1
Goodwill and Intangible Assets-Net - Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]    
2017 (three months) $ 493,264  
2018 1,601,110  
2019 827,033  
2020 75,804  
Total $ 2,997,211 $ 5,833,706
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.8.0.1
Net Loss Per Common Share (Details Narrative) - shares
Jun. 30, 2017
Dec. 31, 2016
Dec. 31, 2015
Number of warrant shares granted 2,000,000    
Opus Bank [Member]      
Number of warrant shares granted   200,000 200,000
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.8.0.1
Net Loss Per Common Share - Schedule of Losses Per Share, Basic and Diluted (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Loss per common share:        
Net loss attributable to common shareholders $ (1,632,816) $ (1,726,178) $ (6,664,818) $ (5,322,541)
Weighted average shares applicable to common shareholders used in computing basic and diluted loss per share 11,485,811 10,006,121 10,835,142 10,031,212
Net loss attributable to common shareholders per share - Basic and Diluted $ (0.14) $ (0.17) $ (0.62) $ (0.53)
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.8.0.1
Debt (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2017
Sep. 02, 2015
Deferred financing costs $ 463,000 $ 463,000  
Payments for deferred purchase Price 5,000,000    
Accrued interest $ 270,000 $ 270,000  
Insurance financing interest rate 5.25% 5.25%  
Opus Bank Loan [Member]      
Percentage of shares secured for debt   65.00%  
Opus Bank Loan [Member] | Revolving Credit Facility [Member]      
Credit facility, maximum borrowing capacity     $ 2,000,000
Opus Bank Loan [Member] | Term Loan [Member]      
Credit facility, maximum borrowing capacity     8,000,000
Vehicle Financing Notes [Member]      
Debt instrument term description   3 to 6 year terms  
Total [Member] | Opus Bank Loan [Member]      
Credit facility, maximum borrowing capacity     $ 10,000,000
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Commitments and Contingencies Disclosure [Abstract]        
Operating leases expire year     expiring through 2021.  
Operating leases, rent expense $ 237,000 $ 202,000 $ 690,000 $ 581,000
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.8.0.1
Commitments and Contingencies - Schedule of Future Minimum Lease Payments Under Non-cancelable Operating Leases (Details)
Sep. 30, 2017
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
2017 (three months) $ 68,994
2018 304,357
2019 163,179
Total $ 536,530
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.8.0.1
Shareholders' Equity Transactions (Details Narrative) - Preferred Stock [Member] - USD ($)
1 Months Ended 9 Months Ended
Sep. 30, 2017
Aug. 31, 2017
Sep. 30, 2017
Number of stock shares issued during the period   60,195
Shares issued price per share $ 25.00 $ 25.00 $ 25.00
Net proceeds from issuance of preferred stock   $ 1,300,000  
Preferred stock redemption price per share $ 25.00   $ 25.00
Two Public Preferred Stock Offerings [Member]      
Number of stock shares issued during the period 255,000    
Net proceeds from issuance of preferred stock $ 5,600,000    
Cumulative preferred stock dividend per share $ 2.75    
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.8.0.1
Related Parties (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Operating leases, rent expense $ 237,000 $ 202,000 $ 690,000 $ 581,000  
Accrued liability to related party 16,614   16,614   $ 16,626
Kashmir Air, Inc [Member]          
Operating leases, rent expense 32,000 32,000 96,000 96,000  
Accrued liability to related party 17,000   17,000   17,000
Physician [Member]          
Revenues 4,000 5,000 12,000 13,000  
Receivable balance due from this customer 1,500   1,500   1,600
Chief Executive Officer [Member]          
Operating leases, rent expense 47,000 $ 43,000 141,000 $ 131,000  
Security deposit 13,000   13,000   $ 13,000
Prepaid rent $ 12,000   $ 12,000    
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock-Based Compensation (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 9 Months Ended
Apr. 30, 2017
Aug. 31, 2017
May 31, 2017
Sep. 30, 2017
Sep. 30, 2017
Dec. 31, 2016
Apr. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]              
Liability for cash-settled awards       $ 17,000 $ 17,000 $ 31,000  
Common Stock [Member]              
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]              
Number of shares issued     1,000,000   1,000,000    
Preferred Stock [Member]              
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]              
Number of shares issued   60,195        
Restricted Stock Units (RSUs) [Member]              
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]              
Restricted shares granted to outside members of the Board of Directors         528,000    
Unvested stock option award, equity       548,334 548,334    
Unvested stock option award, liability       30,135 30,135    
2014 Equity Incentive Plan [Member] | Employees Officers Directors and Consultants [Member]              
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]              
Share-based compensation arrangement by share-based payment award, number of shares authorized             1,351,000
2014 Equity Incentive Plan [Member] | Board of Directors [Member] | Restricted Stock Units (RSUs) [Member]              
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]              
Restricted shares granted to outside members of the Board of Directors       200,000      
2014 Equity Incentive Plan [Member] | Three Executive Officers [Member] | Restricted Stock Units (RSUs) [Member]              
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]              
Restricted shares granted to outside members of the Board of Directors       300,000      
Amended and Restated Equity Incentive Plan [Member] | Common Stock [Member]              
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]              
Number of shares issued 1,500,000            
Share-based compensation arrangement by share-based payment award, number of shares available for grant       1,238,734 1,238,734    
Amended and Restated Equity Incentive Plan [Member] | Series A Preferred Stock [Member]              
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]              
Number of shares issued 100,000            
Amended and Restated Equity Incentive Plan [Member] | Preferred Stock [Member]              
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]              
Share-based compensation arrangement by share-based payment award, number of shares available for grant       67,000 67,000    
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock-Based Compensation - Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs (Details) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]        
Total share-based compensation expense $ 125,819 $ 143,793 $ 333,854 $ 765,595
Direct Operating Costs [Member]        
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]        
Total share-based compensation expense 1,705 3,571 7,162 8,909
General and Administrative [Member]        
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]        
Total share-based compensation expense 124,789 131,077 318,870 731,690
Research and Development [Member]        
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]        
Total share-based compensation expense (675) 3,767 7,822 6,910
Selling and Marketing [Member]        
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]        
Total share-based compensation expense $ 5,378 $ 18,086
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.8.0.1
Stock-Based Compensation - Disclosure of Share-based Compensation Arrangements by Share-based Payment Award (Details) - Restricted Stock Units (RSUs) [Member]
9 Months Ended
Sep. 30, 2017
shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Outstanding and unvested at beginning 406,959
Granted 528,000
Vested (327,159)
Forfeited (29,331)
Outstanding and unvested at ending 578,469
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.8.0.1
Restructuring Charges (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Mar. 31, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Restructuring Charges Details Narrative          
Restructuring charges $ 276,000 $ 275,628
Accrued restructuring charges $ 19,000     $ 19,000  
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.8.0.1
Fair Value of Financial Instruments (Details Narrative) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Business combination, contingent consideration, liability, current and long term portion $ 537,736 $ 535,477
Fair Value, Inputs, Level 2 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Long-term debt, fair value   7,300,000
Fair Value, Input, Level 3 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Business combination, contingent consideration, liability, current and long term portion 670,000 930,000
Opus Debt [Member] | Fair Value, Inputs, Level 2 [Member]    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Line of credit $ 2,000,000 $ 2,000,000
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.8.0.1
Fair Value of Financial Instruments - Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation (Details) - Fair Value, Input, Level 3 [Member] - USD ($)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Balance, beginning $ 929,549 $ 1,172,508
Acquisitions 678,368
Change in fair value 151,423 (607,978)
Settlement in the form of shares issued (331,676)
Payments (79,603) (153,799)
Balance, ending $ 669,693 $ 1,089,099
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.8.0.1
Subsequent Event (Details Narrative) - USD ($)
1 Months Ended
Oct. 31, 2017
Sep. 30, 2017
Opus Credit Facility [Member]    
Revolving line of credit   $ 2,000,000
Subsequent Event [Member] | SVB Debt Agreement [Member]    
Payment of fees $ 90,000  
Number of warrants to purchase shares of common stock 125,000  
Payments for annual anniversary fee $ 50,000  
Subsequent Event [Member] | Opus Credit Facility [Member]    
Revolving line of credit $ 5,000,000  
Unsecured portion of credit line fee, percentage 0.50%  
Secured revolving line of credit percentage 200.00%  
Percentage of shares in offshore facilities 65.00%  
Subsequent Event [Member] | Opus Credit Facility [Member] | Prime Rate [Member]    
Revolving line of credit, interest rate - Prime plus 1.75%  
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