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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2010
 Commission file number 1-35069
 MEDQUIST HOLDINGS INC.
 (Exact name of registrant as specified in its charter)
 Delaware(State or other jurisdiction of 
incorporation or organization)
    
    98-0676666(I.R.S. Employer Identification No.)
 9009 Carothers Parkway, Franklin, TN 37067  (Address of principal executive offices)
 Registrants telephone number, including area code:
(615) 261  1740
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredCommon Stock, $0.10 par value per share
    
    The NASDAQ Global Market
 Securities registered pursuant to Section 12(g) of the Act:
None
 (Title of Class)
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 o þ
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 o o
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  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated
Filer þ
(Do not check if a
smaller reporting
company)
    
    Smaller reporting
company o
 o þ
   Documents incorporated by reference




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##### 



MedQuist Holdings, Inc.
Annual Report on Form 10-K
Table of Contents
 PagePART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    13Item 1B. Unresolved Staff Comments
    
    
    22Item 2. Properties
    
    
    22Item 3. Legal Proceedings
    
    
    22Item 4. Reserved
    
    
    23PART IIItem 5. Market For Registrants Common Equity, Related Shareholder Matters And Issuer
Purchases Of Equity Securities
    
    
    23Item 6. Selected Financial Data
    
    
    24Item 7. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
    
    
    24Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    39Item 8. Financial Statements And Supplementary Data
    
    
    40Item 9. Changes In And Disagreements With Accountants On Accounting And Financial Disclosure
    
    
    40Item 9A. Controls And Procedures
    
    
    40Item 9B. Other Information
    
    
    40PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    40Item 11. Executive Compensation
    
    
    41Item 12. Security Ownership of Certain Beneficial Owners and Management
    
    
    41Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    41Item 14. Principal Accountant Fees and Services
    
    
    41PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    41EX-3.1EX-3.2EX-10.6EX-10.7EX-10.8EX-10.44EX-31.1EX-31.2EX-32.1
  2




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  
    
    each of the factors discussed in this Item 1A, Risk Factors as well as risks discussed elsewhere in this report;
    
    each of the matters discussed in Item 3, Legal Proceedings;
    
    our ability to recruit and retain qualified MTs, MEs and other employees;
    
    changes in law, including, without limitation, the impact HIPAA will have on our business; and
    
    the impact of our new services and products on the demand for our existing services and products.
  
 Item 1. Business
 Overview
    3




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Our industry
 Growth of clinical documentation in the United States
   Importance of the physician narrative
   4




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Market opportunity
  Market segmentation and trends
    Our competitive strengths
  n
    
    Leader in a large, fragmented market We are the largest provider by revenue of
clinical documentation solutions based on the physician narrative in the United States. Our
size enables us to meet the needs of large, sophisticated healthcare customers, provides
economies of scale, and enables us to devote significantly more resources to research and
development and quality assurance than many other providers.
 n
    
    Integrated solutions delivered as a complete managed service We offer fully-integrated
end-to-end managed services that capture and convert the physician narrative into a high
quality customized electronic record. We integrate technologies and services for voice
capture and transmission, ASR, medical transcription and editing, workflow automation, and
document management and distribution. The end result is value-added clinical documentation
with high accuracy and quick turn-around times.
 n
    
    Large and diversified customer base with long-term relationships We serve hospitals,
clinics and physician practices throughout the United States. We have a long-standing
history with our customers and the majority of our revenue was from recurring services.
 n
    
    Highly-efficient operating model Over the past two years, we have driven down our cost
structure through leveraging our scalable infrastructure, standardizing processes, and
increased utilization of ASR. Our use of ASR, which has grown from 39% of our volume in the
fourth quarter of 2008 to 71% in the fourth quarter of 2010, has increased our productivity.
Additionally, our expanding footprint in India has enabled us to increase our offshore
production from 28% of our volume to
42% over this same period. The financial impact of these measures has been an improvement in
gross margins during this timeframe from 34% to 42%.
 5




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n
    
    Proven management team We have assembled an outstanding senior leadership team with
significant industry experience and domain expertise in both domestic and offshore
operations. Our management team has delivered substantial results and brings an
entrepreneurial spirit with proven experience in managing growth, driving operational
improvements, and successfully integrating acquisitions.
 Our strategy
  n
    
    Expand our customer base and increase existing customer penetration We intend to grow
our customer base by targeting three market segments: large healthcare providers still using
in-house services, large healthcare providers currently using competing outsourced
alternatives, and small to medium hospitals and physician practices. Given our market
leadership, strong solution offerings, and low cost structure, we believe we are well
positioned to both replace in-house solutions as well as displace competing outsourced
alternatives for large healthcare providers. In order to increase penetration within our
existing customer base, we intend to continue targeting additional healthcare clinical areas
and facilities of our current customers. Additionally, as healthcare providers centralize
their purchasing decisions, we believe that our ability to deliver outstanding services for
large, complex requirements provides us with increasing access to new sales opportunities
within our existing customer base and through existing customer relationships.
 n
    
    Continue to develop and enhance our integrated solutions We seek to differentiate our
integrated solutions through sophisticated technology and process improvement. We have
 more than 100 employees dedicated to research and development. Over the last year, we
launched numerous enhancements, including a front end speech platform for general medicine,
additional EHR system integration, and advanced performance monitoring.
 n
    
    Enhance profitability through technical and operational expertise We have made
significant improvements in productivity through business process and infrastructure
improvements. Notwithstanding reductions in customer pricing, our gross margins have
expanded from 34% in the fourth quarter of 2008 to 42% in the fourth quarter of 2010. Our
management team has proven its ability to implement continuous process improvements and we
intend to further increase offshore production and our use of technological automation,
including ASR, to lower costs and enhance our profitability.
 n
    
    Facilitate the adoption and promote meaningful use of EHR systems Our integrated
solutions provide a comprehensive, accurate and effective method to incorporate physician
narrative into an EHR system. We interface with substantially all of the leading EHR vendors
to integrate our clinical documentation solutions and to help our customers realize the full
potential of their EHR systems through the use of the physician narrative. In our
experience, when EHR is adopted, customers tend to consolidate their purchase decisions,
which benefit us as a leading provider of clinical documentation solutions.
 n
    
    Pursue strategic acquisitions We believe that there are significant opportunities
available to create value through strategic acquisitions. We intend to seek appropriate
opportunities to grow our customer base, enhance or expand our
solutions, incorporate synergy opportunities, and expand our value proposition to our customers.
 Our solutions
 Clinical documentation solutions for healthcare providers
   6




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n
    
    Capture As the first step in a workflow process, users can dictate into one of several
input devices, including a variety of handheld dictation devices, Smartphone applications,
proprietary handsets, standard telephones, or PC-based dictation stations. Users can also
use PC-based speech recognition applications for those who prefer to edit their own files in
real-time. By supporting a wide array of capture methods, we provide true choice to our
customers to decide which workflow best suits their needs. Users can change as needed from
real-time to batch-based workflows to maximize their productivity.
 n
    
    Manage Captured voice files are merged with patient information from our customers
information systems and EHRs where they are loaded into our enterprise platform for
processing. The platform balances production resources across both in-house and outsourced
personnel, and its web-based management capabilities allow administrators to easily manage
workflows from anywhere at any time. We generate draft reports using speech recognition
technology which are reviewed by our Medical Editors (MEs). We can also use conventional
transcription services from our Medical Transcriptionists (MTs). To maintain high quality
and efficiency, our platform automatically matches voice files from various specialties and
acuity levels to the MTs or MEs with the appropriate skill sets. It also includes random
quality checks to give timely feedback to our personnel. Turn-around time is an important
metric for our customers, and so the system optimizes processing to ensure we fulfill our
contracted service level agreements, which typically range from one hour to 48 hours. In
addition, the platform provides real-time access for our customers to not only see into
their work moving through the system, but provides dashboard metrics and reporting to help
manage their enterprises.
 n
    
    Analyze Completed reports are routed back to physicians or other healthcare
professionals for review, final editing (as required), and authentication. These reports are
then available to drive additional value added services, such as coding, data abstraction
for analytics, measures reporting, and billing services. We provide customers with
sophisticated reporting capabilities and integrated electronic signature solutions to
simplify and accelerate the review of their clinical reports. We use
Quantify, our patent-pending natural language processing
technology, to convert final reports into structured documentation
formats.
 7




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This technology allows us to scan health records for information
needed by the customer to fulfill their regulatory and local
reporting requirements. This technology can also be used to
structure documentation in the health record for use in populating EHRs and for data analysis.
 n
    
    Distribute After being approved by the physician, electronic records are distributed.
We provide a fully featured distribution solution for printing, faxing and electronic
distribution to referring physicians. We have developed thousands of interfaces with major,
mid-level and proprietary hospital information systems, radiology information systems,
health information repositories and electronic health record (EHR) systems. Our solution
supports HL7 and XML-based formats which further allows us to meet the needs of each
individual customer. Throughout the entire workflow, our managed service platform maintains
security measures and audit trails in full compliance with the Health Insurance Portability
and Accountability Act of 1996 (HIPAA) privacy and security standards and regulations and
the protection of the confidentiality of patient information.
 In delivering these customized workflows, we offer a variety of software products. These can
work either as stand-alone solutions or as integrated solutions with our other managed
services. These solutions include:
 n
    
    DocQment Enterprise Platform (DEP) Our core platform provides a powerful and flexible
transcription solution that integrates the process of dictation, transcription, speech
recognition, editing, and document delivery into a unified clinical information management
workflow. We offer the platform typically as a managed service. For those customers that
prefer to use their own services, we also offer it on a license basis. Our platform provides
a high performance and highly customizable clinical documentation workflow. It integrates
with every major hospital system vendor, such as Epic, Cerner and Meditech.
 n
    
    SpeechQ Our front-end speech recognition family of solutions enables physicians to dictate,
edit, and sign their reports in real-time. With workflows customized for numerous medical
practices, such as radiology and general medicine, SpeechQ offers end-to-end workflows that combine
voice commands and dictation. SpeechQ integrates with our enterprise platform in scenarios where a
physician prefers to send text to our editors for review. It interfaces with EHRs and other
healthcare systems to allow patient demographic information to be automatically populated, updated,
and distributed in real-time. Our newest SpeechQ offering, SpeechQDirect can voice-enable customer
EHRs to drive greater adoption, which will assist them in realizing incentive funds from the
government for that adoption. Healthcare providers can now use their voice in addition to keyboard
and mouse to seamlessly interact with their desktop clinical applications, including the dictation
of medical narrative and speech-based navigation within 3rd party applications. Using this
solution, providers can improve documentation efficiency and avoid the trap of template-based
point-and-click systems, augmenting discretely captured data with a narrative of the patients
story.
 n
    
    CodeRunnerCAC Our web-based workflow and workforce management system manages the
entire coding process for our customers. Health records are fed into the system where
natural language processing technology scans the information and delivers suggested codes to
the hospital coding staff. This allows them to become more accurate, reduce turnaround time
and increase productivity. All of these factors contribute to increased revenue and
improved cash flow by shortening the revenue cycle and making fewer errors that can result
in denials by payors.
 n
    
    DocQVoice Our web-based enterprise digital voice capture and transport solution is
deployed at the customers location and integrates with both our enterprise platform and
legacy dictation systems.
 8




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Selling and marketing
   n
    
    attending and sponsoring industry trade shows of national organizations, such as the
American Health Information Management Association, Healthcare Information and Management
Systems Society, Association for Healthcare Documentation Integrity, Radiological Society of
North America, Society for Imaging Informatics in Medicine, and Medical Transcription
Industry Alliance;n
    
    participating in work groups and leadership committees of the industry associations; andn
    
    advertising in trade journals related to our industry.
 Operations
  Technology
 Technology development
   Technology operations
  Competition
  n
    
    in-house service departments of healthcare providers, which we believe produce the
majority of clinical documentation today based on the physician narrative;
 9




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n
    
    national medical transcription service providers, such as Focus Informatics, Inc. (a
subsidiary of Nuance Communications, Inc. (Nuance)), Transcend Services, Inc., and
Webmedex, Inc.;
 n
    
    local or regional medical transcription service organizations;
 n
    
    ASR software vendors, such as Nuance and Multimodal Technologies, Inc. (Multimodal),
which market ASR as a means to reduce clinical documentation labor; and
 n
    
    EHR software vendors which promote their systems as a replacement to narrative-based
input by using on-screen templates and drop-down boxes for data entry.
  n
    
    accuracy and timeliness of documentation produced;n
    
    capacity to handle large volumes and complex workflows;n
    
    ability to provide fully-integrated end-to-end solutions;n
    
    ease of upgrades and ability to add complementary offerings;n
    
    physician acceptance and productivity;n
    
    pricing;n
    
    analytics provided to customers;n
    
    domestic or offshore production capabilities;n
    
    time to implement for new customers; andn
    
    financial stability.
  Government regulation
   10




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HIPAA and HITECH Act
    Other restrictions regarding privacy, confidentiality, and security of health information
  Intellectual property
 ® ®
     11




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Employees
   Recent developments
 U.S. initial public offering
   12




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Private Exchange
  Registered Exchange Offer
  Available Information
  
 Item 1A. Risk Factors
 Risks related to our business
 We compete with many others in the market for clinical documentation solutions which may
result in lower prices for our services, reduced operating margins and an inability to maintain or
increase our market share.
  13




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Our business is dependent upon the continued demand for transcription services. If EHR companies
produce alternatives to medical transcription that reduce the need for transcription, the demand
for our solutions could be reduced.
  Our growth is dependent on the willingness of new customers to outsource and adopt our technology
platforms.
  Our success will depend on our ability to support existing technologies as well as to adopt and
integrate new technology into our workflow platforms.
  Technology innovations in the markets that we serve may create alternatives to our products and
result in reduced sales.
  Many of our customer contracts are terminable at will by our customers, and our ability to sustain
and grow profitable operations is dependent upon the ability to retain customers.
  14




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Our indebtedness could adversely affect our ability to raise additional capital to fund our
operations and limit our ability to pursue our growth strategy or to react to changes in the
economy or our industry, and our debt obligations include restrictive covenants which may restrict
our operations or otherwise adversely affect us.
  n
    
    increasing the difficulty of our ability to make payments on our outstanding debt;
 n
    
    increasing our vulnerability to general economic and industry conditions because our debt
payment obligations may limit our ability to use our cash to respond to or defend against
changes in the industry or the economy;
 n
    
    requiring a substantial portion of our cash flow from operations to be dedicated to the
payment of principal and interest on our indebtedness, therefore reducing our ability to use
our cash flow to fund our operations, capital expenditures and future business
opportunities;
 n
    
    limiting our ability to obtain additional financing for working capital, capital
expenditures, debt service requirements, acquisitions and general corporate or other
purposes;
 n
    
    limiting our ability to pursue our growth strategy; and
 n
    
    placing us at a disadvantage compared to our competitors who are less leveraged and may
be better able to use their cash flow to fund competitive responses to changing industry,
market or economic conditions.
  We are dependent on third party speech recognition software incorporated in certain of our
technologies, and the inability to maintain, support or enhance such third party software over time
could harm our business.
  15




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Our use of open source and third-party software could impose unanticipated conditions or
restrictions on our ability to commercialize our solutions.
   Our ability to expand our business depends on our ability to effectively manage our domestic and
offshore production capacity, which we may not be able to do.
  If we fail to comply with contractual obligations and applicable laws and regulations governing the
handling of patient identifiable medical information, we could suffer material losses or be
adversely affected by exposure to material penalties and liabilities.
   16




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Security and privacy breaches in our systems may damage customer relations and inhibit our growth.
  n
    
    cause our customers to lose confidence in our solutions;n
    
    harm our reputation;n
    
    expose us to liability; andn
    
    increase our expenses from potential remediation costs.
  Our business depends on the reliable and secure operation of our computer hardware, software,
Internet applications and data centers.
   Recent and proposed legislation and possible negative publicity may impede our ability to utilize
offshore production capabilities.
  17




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Any change in legislation, regulation or market practices in the United States affecting healthcare
or healthcare insurance may materially adversely affect our business and results of operations.
  Our business, financial condition and results of operations could be adversely affected by the
political and economic conditions in India.
  n
    
    changes in political, regulatory, legal or economic conditions;n
    
    governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments;n
    
    civil disturbances, including terrorism or war;n
    
    political instability;n
    
    public health emergencies;n
    
    changes in employment practices and labor standards;n
    
    local business and cultural factors that differ from our customary standards and practices; andn
    
    changes in tax laws.
   We are exposed to fluctuations of the value of the Indian rupee against the U.S. dollar, which
could adversely affect our operations.
 18




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We are highly dependent on certain key personnel and the loss of any or all of these key personnel
may have an adverse impact upon future performance.
  We have grown, and may continue to grow, through acquisitions, which could dilute existing
stockholders and could involve substantial integration risks.
  n
    
    difficulty in integrating the operations and personnel of the acquired businesses,
including different and complex accounting and financial reporting systems;
 n
    
    potential disruption of ongoing business and distraction of management;
 n
    
    potential difficulty in successfully implementing, upgrading and deploying in a timely
and effective manner new operational information systems and upgrades of finance and
accounting systems;n
    
    difficulty in incorporating acquired technology and rights into products and technology;n
    
    unanticipated expenses and delays in completing acquired development projects and technology integration;n
    
    management of geographically remote offices and operations;n
    
    impairment of relationships with partners and customers;n
    
    customers delaying purchases or seeking concessions pending resolution of integration
between existing and newly acquired services or technology platforms;n
    
    entering markets or types of businesses in which management has limited experience; andn
    
    potential loss of customers or key employees of the acquired company.
  We are subject to additional regulatory compliance requirements, including section 404 of the
Sarbanes-Oxley Act of 2002. If we fail to maintain an effective system of internal controls, our
reputation and our business could be harmed.
  19




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Our ability to use our net operating loss carryforwards may be limited.
  We may not own 100% of the stock of MedQuist Inc.
  20




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Our largest stockholder may exercise significant control over our company.
  Our certificate of incorporation contains a provision renouncing our interest and expectancy in
certain corporate opportunities, which could adversely affect our business or prospects.
   21




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Item 1B Unresolved Staff Comments
  
 Item 2. Properties
  
 Item 3. Legal proceedings
  Shareholder Litigation
     22




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Item 4. Removed and reserved
 
 Item 5. Market Price Information for Our Shares
  Share price(Dollars)High
    
    LowQuarterFirst
Quarter 2011 (February 4, 2011 through March 11, 2011)
    
    $
    9.66
    
    
    $
    8.30
 Share price(pounds)High
    
    LowQuarterFourth Quarter 2010
    
    £
    7.20
    
    
    £
    5.18Third Quarter 2010
    
    
    6.12
    
    
    
    5.06Second Quarter 2010
    
    
    6.98
    
    
    
    3.89First Quarter 2010
    
    
    9.54
    
    
    
    2.81Fourth Quarter 2009
    
    
    3.80
    
    
    
    3.11Third Quarter 2009
    
    
    3.69
    
    
    
    1.73Second Quarter 2009
    
    
    1.82
    
    
    
    1.51First Quarter 2009
    
    
    2.07
    
    
    
    1.64
 Holders
  Dividends
  Use of
Proceeds
  23




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Item 6. Selected Financial Data
 For years ended December 31,2010
    
    2009
    
    2008
    
    2007
    
    2006Net revenues
    
    $
    417,326
    
    
    $
    353,932
    
    
    $
    171,413
    
    
    $
    42,191
    
    
    $
    35,222Net income
(loss) from continuing operations
    
    
    17,191
    
    
    
    9,171
    
    
    
    (99,460
    )
    
    
    (3,003
    )
    
    
    (121
    )Income (loss) from discontinued operations, net of tax
    
    
    556
    
    
    
    (1,351
    )
    
    
    (9,059
    )
    
    
    407
    
    
    
    261Net income (loss) attributable to MedQuist Holdings Inc.
    
    
    8,507
    
    
    
    735
    
    
    
    (113,673
    )
    
    
    (2,596
    )
    
    
    140Adjusted EBITDA (1)
    
    
    85,500
    
    
    
    59,687
    
    
    
    16,914
    
    
    
    641
    
    
    
    3,001Net income
(loss) per common share from continuing operationsBasic
    
    
    0.14
    
    
    
    (0.02
    )
    
    
    (4.68
    )
    
    
    (0.23
    )
    
    
    (0.04
    )Diluted
    
    
    0.14
    
    
    
    (0.02
    )
    
    
    (4.68
    )
    
    
    (0.23
    )
    
    
    (0.04
    )Net income
(loss) per common share from discontinued operationsBasic
    
    
    0.02
    
    
    
    (0.04
    )
    
    
    (0.40
    )
    
    
    0.03
    
    
    
    0.09Diluted
    
    
    0.02
    
    
    
    (0.04
    )
    
    
    (0.40
    )
    
    
    0.03
    
    
    
    0.09Net income
(loss) per common share attributable MedQuist Holdings Inc.Basic
    
    
    0.16
    
    
    
    (0.06
    )
    
    
    (5.08
    )
    
    
    (0.20
    )
    
    
    0.05Diluted
    
    
    0.16
    
    
    
    (0.06
    )
    
    
    (5.08
    )
    
    
    (0.20
    )
    
    
    0.05Weighted average sharesBasic
    
    
    35,102
    
    
    
    34,692
    
    
    
    22,593
    
    
    
    12,873
    
    
    
    2,736Diluted
    
    
    35,954
    
    
    
    34,692
    
    
    
    22,593
    
    
    
    12,873
    
    
    
    2,736Cash and cash equivalents
    
    $
    66,779
    
    
    $
    29,633
    
    
    $
    42,868
    
    
    $
    2,667
    
    
    $
    515Working capital (deficit) (2)
    
    
    29,988
    
    
    
    (5,114
    )
    
    
    1,128
    
    
    
    10,870
    
    
    
    6,166Total assets
    
    
    414,879
    
    
    
    253,068
    
    
    
    279,177
    
    
    
    51,420
    
    
    
    31,817Long term debt, including current portion of debt
    
    
    294,494
    
    
    
    107,340
    
    
    
    126,008
    
    
    
    14,075
    
    
    
    21,283Total equity
    
    $
    34,511
    
    
    $
    72,301
    
    
    $
    79,350
    
    
    $
    29,853
    
    
    $
    5,326
 
 (1)
    
    See Managements Discussion and Analysis of Financial Condition and results of Operation
for a reconciliation of Net income (loss) attributable to MedQuist Holdings Inc. to Adjusted
EBITDA.(2)
    
    Working capital is defined as total current assets, excluding cash and cash equivalents, minus
total current liabilities, excluding current portion of debt. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 You should read the following discussion and analysis of our financial condition and results of
operations in conjunction with our audited consolidated financial statements and related notes
appearing elsewhere in this report. In addition to historical information, this discussion and
analysis contains forward-looking statements based on current expectations that involve risks,
uncertainties and assumptions, such as our plans, objectives, expectations and intentions set forth
in the Cautionary Statement Regarding Forward-Looking Statements, which can be found in Item 1A,
Risk Factors. Our actual results and the timing of events may differ materially from those
anticipated in these forward-looking statements as a result of various factors, including those set
forth in the Risk Factors section and elsewhere in this report.
 24




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Executive Overview
 Overview
  Key factors affecting our performance
  Volume and pricing trends
    Operating improvements
   25




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Selling, general and administrative expense savings
   Adjusted EBITDA
  Significant developments in the clinical documentation industry include:
   
    
    Reductions in overhead and other administrative costs;
    
    Improvements in the quality and delivery speed of transcribed medical reports;
    
    Access to leading technologies, such as speech recognition technology, without development and
investment risk;
    
    Implementation and management of a medical transcription system tailored to the providers specific
requirements;
    
    Access to skilled MTs and MEs;
    
    Solutions for compliance with governmental and industry mandated privacy and security requirements; and
    
    Product offerings that interface with EHR initiatives.
  
    
    Production volumes;
    
    Adjusted EBITDA (Adjusted earnings before interest, depreciation, amortization, taxes, and other items);
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
    
    Net cash provided by operating activities.
   Critical Accounting Policies, Judgments and Estimates
   Valuation of Long-Lived and Other Intangible Assets and Goodwill.
   
    
    our net book value compared to our fair value;
    
    significant adverse economic and industry trends;
    
    significant decrease in the market value of the asset;
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
    
    the extent that we use an asset or changes in the manner that we use it;
    
    significant changes to the asset since we acquired it; and
    
    other changes in circumstances that potentially indicate all or a portion of the company will be sold.
 Deferred income taxes.
 Commitments and contingencies.
 Revenue recognition.
 Accounts receivable and allowance for doubtful accounts.
  Customer Accommodation Program.
  Basis of Presentation
  Net revenues
  28




---



##### Table of Contents



Cost of revenues
  Selling, general and administrative (SG&A)
  Research and development (R&D)
  Depreciation and amortization
  Cost of legal proceedings and settlements
  Consolidated results of operations
 Comparison of the year ended December 31, 2010 and the year ended December 31, 2009
  29




---



##### Table of Contents



Years ended December 31,2010
    
    
    2009% of Net
    
    
    
    
    
    
    % of NetAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    $ Change
    
    
    % ChangeNet Revenues
    
    $
    417,326
    
    
    
    100
    %
    
    $
    353,932
    
    
    
    100
    %
    
    $
    63,394
    
    
    
    18
    %Cost of revenues
    
    
    259,194
    
    
    
    62
    %
    
    
    229,701
    
    
    
    65
    %
    
    
    29,493
    
    
    
    13
    %Gross Profit
    
    
    158,132
    
    
    
    38
    %
    
    
    124,231
    
    
    
    35
    %
    
    
    33,901
    
    
    
    27
    %Operating costs and expenses :Selling, general and administrative expenses
    
    
    61,062
    
    
    
    15
    %
    
    
    53,089
    
    
    
    15
    %
    
    
    7,973
    
    
    
    15
    %Research and development
    
    
    12,030
    
    
    
    3
    %
    
    
    9,604
    
    
    
    3
    %
    
    
    2,426
    
    
    
    25
    %Depreciation and amortization
    
    
    32,617
    
    
    
    8
    %
    
    
    25,366
    
    
    
    7
    %
    
    
    7,251
    
    
    
    29
    %Cost of legal proceedings and settlements
    
    
    3,605
    
    
    
    1
    %
    
    
    14,943
    
    
    
    4
    %
    
    
    (11,338
    )
    
    
    (76
    %)Acquistion and integration related charges
    
    
    7,407
    
    
    
    2
    %
    
    
    1,246
    
    
    
    0
    %
    
    
    6,161
    
    
    
    494
    %Restructuring charges
    
    
    3,672
    
    
    
    1
    %
    
    
    2,727
    
    
    
    1
    %
    
    
    945
    
    
    
    35
    %Total operating costs and expenses
    
    
    120,393
    
    
    
    29
    %
    
    
    106,975
    
    
    
    30
    %
    
    
    13,418
    
    
    
    13
    %Operating income (loss)
    
    
    37,739
    
    
    
    9
    %
    
    
    17,256
    
    
    
    5
    %
    
    
    20,483
    
    
    
    119
    %Gain on the sale of investment
    
    
    8,780
    
    
    
    2
    %
    
    
    
    
    
    
    
    
    
    
    8,780
    
    
    
    n/aEquity in income of affiliated company
    
    
    693
    
    
    
    0
    %
    
    
    1,933
    
    
    
    1
    %
    
    
    (1,240
    )
    
    
    (64
    %)Other income
    
    
    460
    
    
    
    0
    %
    
    
    13
    
    
    
    0
    %
    
    
    447
    
    
    
    3438
    %Loss on extinguishment of debt
    
    
    (13,525
    )
    
    
    (3
    %)
    
    
    
    
    
    
    
    
    
    
    (13,525
    )
    
    
    n/aInterest expense, net
    
    
    (19,268
    )
    
    
    (5
    %)
    
    
    (9,019
    )
    
    
    (3
    %)
    
    
    (10,249
    )
    
    
    114
    %Income (loss) from continuing operations before
income taxes and noncontrolling interest
    
    
    14,879
    
    
    
    4
    %
    
    
    10,183
    
    
    
    3
    %
    
    
    4,696
    
    
    
    46
    %Income tax provision (benefit)
    
    
    (2,312
    )
    
    
    (1
    %)
    
    
    1,012
    
    
    
    0
    %
    
    
    (3,324
    )
    
    
    (328
    %)Net income (loss) from continuing operations
    
    
    17,191
    
    
    
    4
    %
    
    
    9,171
    
    
    
    3
    %
    
    
    8,020
    
    
    
    87
    %Discontinued operationsIncome (loss) from discontinued Patient Financial
Services business, net of tax
    
    
    556
    
    
    
    0
    %
    
    
    (1,351
    )
    
    
    0
    %
    
    
    1,907
    
    
    
    (141
    %)Income (loss)from discontinued operations
    
    
    556
    
    
    
    0
    %
    
    
    (1,351
    )
    
    
    0
    %
    
    
    1,907
    
    
    
    (141
    %)Net income (loss)
    
    
    17,747
    
    
    
    4
    %
    
    
    7,820
    
    
    
    2
    %
    
    
    9,927
    
    
    
    127
    %Less: Net (income) loss attributable to
noncontrolling interests
    
    
    (9,240
    )
    
    
    (2
    %)
    
    
    (7,085
    )
    
    
    (2
    %)
    
    
    (2,155
    )
    
    
    30
    %Net loss (income) attributable to MedQuist
Holdings Inc.
    
    $
    8,507
    
    
    
    2
    %
    
    $
    735
    
    
    
    0
    %
    
    $
    7,772
    
    
    
    1057
    %Adjusted EBITDA (1)
    
    $
    85,500
    
    
    
    20
    %
    
    $
    59,687
    
    
    
    17
    %
    
    $
    25,813
    
    
    
    43
    %
 
 (1)
    
    See below for a reconciliation of net income attributable to MedQuist Holdings Inc. to
Adjusted EBITDA. Net revenues
  Cost of revenues
  Selling, general and administrative
  30




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##### Table of Contents



Research and development
  Depreciation and amortization
  Cost of legal proceedings and settlements
  Acquisition and integration related charges
  Restructuring charges
  Gain on sale of investment
  Loss on extinguishment of debt
  Interest expense, net
  Income tax provision
  31




---



##### Table of Contents



Net income attributable to noncontrolling interests
  Comparison of years ended December 31, 2009 and 2008
  Years ended December 31,2009
    
    
    2008% of Net
    
    
    
    
    
    
    % of Net
    
    
    
    
    
    
    %Amount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    $ Change
    
    
    ChangeNet Revenues
    
    $
    353,932
    
    
    
    100
    %
    
    $
    171,413
    
    
    
    100
    %
    
    $
    182,519
    
    
    
    106
    %Cost of revenues
    
    
    229,701
    
    
    
    65
    %
    
    
    113,127
    
    
    
    66
    %
    
    
    116,574
    
    
    
    103
    %Gross Profit
    
    
    124,231
    
    
    
    35
    %
    
    
    58,286
    
    
    
    34
    %
    
    
    65,945
    
    
    
    113
    %Operating costs and expenses :Selling, general and administrative expenses
    
    
    53,089
    
    
    
    15
    %
    
    
    37,282
    
    
    
    22
    %
    
    
    15,807
    
    
    
    42
    %Research and development
    
    
    9,604
    
    
    
    3
    %
    
    
    6,099
    
    
    
    4
    %
    
    
    3,505
    
    
    
    57
    %Depreciation and amortization
    
    
    25,366
    
    
    
    7
    %
    
    
    13,488
    
    
    
    8
    %
    
    
    11,878
    
    
    
    88
    %Cost of legal proceedings and settlements
    
    
    14,943
    
    
    
    4
    %
    
    
    5,311
    
    
    
    3
    %
    
    
    9,632
    
    
    
    181
    %Acquistion and integration related charges
    
    
    1,246
    
    
    
    0
    %
    
    
    5,620
    
    
    
    3
    %
    
    
    (4,374
    )
    
    
    (78
    %)Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    89,633
    
    
    
    52
    %
    
    
    (89,633
    )
    
    
    100
    %Restructuring charges
    
    
    2,727
    
    
    
    1
    %
    
    
    2,106
    
    
    
    1
    %
    
    
    621
    
    
    
    29
    %Total operating costs and expenses
    
    
    106,975
    
    
    
    30
    %
    
    
    159,539
    
    
    
    93
    %
    
    
    (52,564
    )
    
    
    -33
    %Operating income (loss)
    
    
    17,256
    
    
    
    5
    %
    
    
    (101,253
    )
    
    
    (59
    %)
    
    
    118,509
    
    
    
    (117
    %)Equity in income of affiliated company
    
    
    1,933
    
    
    
    1
    %
    
    
    66
    
    
    
    0
    %
    
    
    1,867
    
    
    
    2,829
    %Other income
    
    
    13
    
    
    
    0
    %
    
    
    9
    
    
    
    0
    %
    
    
    4
    
    
    
    44
    %Interest expense, net
    
    
    (9,019
    )
    
    
    (3
    %)
    
    
    (3,813
    )
    
    
    (2
    %)
    
    
    (5,206
    )
    
    
    137
    %Income (loss) from continuing operations before
income taxes and noncontrolling interest
    
    
    10,183
    
    
    
    3
    %
    
    
    (104,991
    )
    
    
    (61
    %)
    
    
    115,174
    
    
    
    (110
    %)Income tax provision (benefit)
    
    
    1,012
    
    
    
    0
    %
    
    
    (5,531
    )
    
    
    (3
    %)
    
    
    6,543
    
    
    
    (118
    %)Net income (loss) from continuing operations
    
    
    9,171
    
    
    
    3
    %
    
    
    (99,460
    )
    
    
    (58
    %)
    
    
    108,631
    
    
    
    (109
    %)Discontinued operationsIncome (loss) from discontinued Patient Financial
Services business, net of tax
    
    
    (1,351
    )
    
    
    0
    %
    
    
    (9,059
    )
    
    
    (5
    %)
    
    
    7,708
    
    
    
    (85
    %)Income (loss)from discontinued operations
    
    
    (1,351
    )
    
    
    0
    %
    
    
    (9,059
    )
    
    
    (5
    %)
    
    
    7,708
    
    
    
    (85
    %)Net income (loss)
    
    
    7,820
    
    
    
    2
    %
    
    
    (108,519
    )
    
    
    (63
    %)
    
    
    116,339
    
    
    
    (107
    %)Less: Net (income) loss attributable to
noncontrolling interests
    
    
    (7,085
    )
    
    
    (2
    %)
    
    
    (5,154
    )
    
    
    (3
    %)
    
    
    (1,931
    )
    
    
    37
    %Net loss (income) attributable to MedQuist
Holdings Inc.
    
    $
    735
    
    
    
    0
    %
    
    $
    (113,673
    )
    
    
    (66
    %)
    
    $
    114,408
    
    
    
    (101
    %)Adjusted EBITDA (1)
    
    $
    59,687
    
    
    
    17
    %
    
    $
    16,914
    
    
    
    10
    %
    
    $
    42,773
    
    
    
    253
    %
 
 (1)
    
    See below for a reconciliation of net income (loss) attributable to MedQuist Holdings
Inc. to Adjusted EBITDA. Net revenues
  n
    
    $171.5 million from the consolidation of MedQuist Inc. for a full year resulting from our
acquisition of MedQuist Inc. in August 2008; andn
    
    an increase in clinical documentation revenue of $11.0 million due to organic volume
growth.
 32




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##### Table of Contents



Cost of revenues
  n
    
    $110.8 million from the consolidation of MedQuist Inc. for a full year; andn
    
    an increase of $5.7 million in clinical documentation cost of revenues, primarily due to
increased personnel cost to support expansion of capacity.
 Selling, general and administrative
  n
    
    consolidation of a full-year of MedQuist Inc. selling, general and administrative expense of $13.9 million;n
    
    increase in share based compensation charge of $0.8 million;n
    
    full year impact of the cost of our new management team and corporate costs in 2009 amounting to $2.6 million;
 Research and development
  Depreciation and amortization
  Cost of legal proceedings and settlements
  Acquisition and integration related charges
  33




---



##### Table of Contents



Goodwill impairment charge
   Interest expense, net
  Income tax provision
  Loss from discontinued operations
  Adjusted EBITDA
  34




---



##### Table of Contents



2010
    
    
    2009
    
    
    2008
    


2007




2006Net income (loss) attributable to MedQuist Holdings Inc.
    
    $
    8,507
    
    
    $
    735
    
    
    $
    (113,673
    )

$
(2,596
)

$
138Net income (loss) attributable to noncontrolling interest
    
    
    9,240
    
    
    
    7,085
    
    
    
    5,154
    


(57
)


31Income tax provision (benefit)
    
    
    (2,312
    )
    
    
    1,012
    
    
    
    (5,531
    )


(113
)


(46
)Interest expense, net
    
    
    19,268
    
    
    
    9,019
    
    
    
    3,813
    


2,108



1,628Depreciation and amortization
    
    
    32,617
    
    
    
    25,366
    
    
    
    13,488
    


2,915



2,258Cost of legal proceedings and settlements
    
    
    3,605
    
    
    
    14,943
    
    
    
    5,311
    






Acquisition and integration related charges
    
    
    7,407
    
    
    
    1,246
    
    
    
    5,620
    






Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    89,633
    






Restructuring charges
    
    
    3,672
    
    
    
    2,727
    
    
    
    2,106
    






Equity in income of affiliated company
    
    
    (693
    )
    
    
    (1,933
    )
    
    
    (66
    )


105



Gain on the sale of investment
    
    
    (8,780
    )
    
    
    
    
    
    
    
    






Loss on extinguishment of debt
    
    
    13,525
    
    
    
    
    
    
    
    
    






Asset impairment charges, severance charges
and accrual reversals
    
    
    
    
    
    
    (1,864
    )
    
    
    2,000
    






(Income) loss of discontinued operations
    
    
    (556
    )
    
    
    1,351
    
    
    
    9,059
    


(1,721
)


(1,008
)Adjusted EBITDA
    
    $
    85,500
    
    
    $
    59,687
    
    
    $
    16,914
    

$
641


$
3,001
  
    
    potential differences caused by variations in capital structures (affecting interest expense, net),
tax positions (such as the impact on periods or companies for changes in effective tax rates), the
age and book depreciation of fixed assets (affecting depreciation expense);
    
    the impact of non-cash charges, such as goodwill impairment charges and asset impairment charges; and
    
    the impact of  acquisition and integration related charges,
disposition related charges,
restructuring charges, severance costs and certain unusual or nonrecurring items.
  
    
    Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital
expenditures or contractual commitments;
    
    Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
    
    although depreciation is a non-cash charge, the assets being depreciated will often have to be
replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such
replacements; and
    
    other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting
its usefulness as a comparative measure.
 35




---



##### Table of Contents



Liquidity and Capital Resources
   
    
    addition of cash flows provided by Spheris operations;
    
    acquisition and integration related charges associated with the Spheris
acquisition;
    
    cash received from the sale of A-Life and Patient Financial Services business;
    
    restructuring payments; and
    
    other working capital changes.
    
    
    $28.5 million repayment of bridge note to Royal Philips Electronics incurred at
MedQuist Inc. acquisition
    
    $15.3 million payment of dividend to noncontrolling shareholders of MedQuist Inc.
    
    Offset by other working capital changes.
 Prior to the Corporate Refinancing in October 2010
  36




---



##### Table of Contents



Subsequent to the Corporate Refinancing in October 2010
     Operating activities
   37




---



##### Table of Contents



Investing activities
  Financing activities
  Off-Balance Sheet Arrangements
 .
 Quantitative and qualitative disclosures about market risk
  Contractual Obligations
  Payment Due By PeriodLess than
    
    
    
    
    
    
    
    
    
    
    AfterTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating Lease Obligations
    
    $
    28,944
    
    
    $
    7,230
    
    
    $
    12,056
    
    
    $
    7,329
    
    
    $
    2,329Purchase Obligations(1)
    
    
    21,311
    
    
    
    8,567
    
    
    
    11,820
    
    
    
    924
    
    
    
    Severance and Other
 Obligations
    
    
    3,960
    
    
    
    3,223
    
    
    
    470
    
    
    
    267
    
    
    
    Long Term Debt including
current maturities
    
    
    294,494
    
    
    
    27,817
    
    
    
    41,347
    
    
    
    140,330
    
    
    
    85,000Total Contractual Obligations
    
    $
    348,709
    
    
    $
    46,837
    
    
    $
    65,693
    
    
    $
    148,850
    
    
    $
    87,329
 38




---



##### Table of Contents



(1)
    
    Purchase obligations are for ASR agreements ($12,150), telecommunication contracts ($8,636), software development
($275) and other recurring purchase obligations ($250).  Recent Accounting Pronouncements
  Revenue RecognitionMultiple-Element Arrangements
 Software-Revenue Recognition
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  Interest rate sensitivity
    39




---



##### Table of Contents



Item 8. Financial Statements And Supplementary Data
  
 Item 9. Changes in And Disagreements With Accountants On Accounting And Financial Disclosure
  
 Item 9A. Evaluation of Disclosure Controls and Procedures
   
 Item 9B. Managements Annual Report on Internal Control over Financial Reporting Other Information
  Item 9C. Changes in Internal Control over Financial Reporting
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  40




---



##### Table of Contents



Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a) Documents filed as part of this report:
 Financial Statements.
 Financial Statement Schedules.
 Exhibits.
 (b) Exhibits:
 Number
    
    Description of Document3.1*
    
    Certificate of Incorporation3.2*
    
    By-Laws4.1
    
    Warrant Agreement, dated March 19, 2001, between MedQuist
Holdings Inc. and Oosterveld International BV (Incorporated by
reference to Exhibit 4.5 of Amendment No. 1 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))4.2
    
    Senior Subordinated Note Purchase Agreement, dated as of
September 30, 2010, among CBay Inc., MedQuist Inc. and
MedQuist Transcriptions Ltd., CBaySystems Holdings Limited,
BlackRock Kelso Capital Corporation, PennantPark Investment
Corporation, Citibank, N.A. and THL Credit Inc. (Incorporated
by reference to Exhibit 4.2 of Amendment No. 1 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))4.3
    
    Form of 13% Senior Subordinated Note due 2016 (included as
part of Exhibit 4.3 and incorporated herein by reference)4.4
    
    Guaranty Agreement, dated as of September 30, 2010, among
CBaySystems Holdings Limited, MedQuist IP LLC, MedQuist CM
LLC, MedQuist Delaware, Inc. and Each Other Guarantor From
Time to Time Party Hereto, BlackRock Kelso Capital
Corporation, PennantPark Investment Corporation, Citibank,
N.A. and THL Credit Inc. (Incorporated by reference to Exhibit
10.4 of Amendment No. 1 to the Registration Statement on Form
S-1 of MedQuist Holdings Inc. (File No. 333-169997))
 41




---



##### Table of Contents



Number
    
    Description of Document4.5
    
    Exchange Agreement, dated as of September 30, 2010, by and
between CBaySystems Holdings Limited and the Investors
signatories thereto (Incorporated by reference to Exhibit 4.4
of Amendment No. 2 to the Registration Statement on Form S-1
of MedQuist Holdings Inc. (File No. 333-169997))4.6
    
    Amendment No. 1 to the Exchange Agreement, dated as of
December 30, 2010, by and between CBaySystems Holdings Limited
and the Investors signatories thereto (Incorporated by
reference to Exhibit 4.4.1 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))9.1
    
    Voting Agreement, dated September 30, 2010, by and between
CBaySystems Holdings Limited, S.A.C. PEI CB Investment, L.P.,
S.A.C. PEI CB Investment II, LLC and International Equities
(S.A.C. Asia) Limited (Incorporated by reference to Exhibit
9.1 of Amendment No. 1 to the Registration Statement on Form
S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.1
    
    Stock and Asset Purchase Agreement, dated April 15, 2010,
between Spheris Holding II, Inc., Spheris Inc., Spheris
Operations LLC, Vianeta Communications, Spheris Leasing LLC,
Spheris Canada Inc., CBay Inc. and MedQuist Inc. (Incorporated
by reference to Exhibit 10.1 of Amendment No. 1 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.2
    
    Credit Agreement, dated as of October 1, 2010, among CBay
Inc., MedQuist Inc. and MedQuist Transcriptions, Limited, as
Borrowers, CBaySystems Holdings Limited, as Holdings, the
Lenders and L/C Issuers party thereto, General Electric
Capital Corporation, as Administrative Agent and Collateral
Agent, SunTrust Bank, as Syndication Agent, and ING Capital
LLC and Regions Bank, as Co-Documentation Agents (Incorporated
by reference to Exhibit 10.2 of Amendment No. 1 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.3
    
    Guaranty and Security Agreement, dated as of October 14, 2010,
among CBay Inc., MedQuist Inc., MedQuist Transcriptions,
Limited, General Electric Capital Corporation, as
Administrative Agent and Collateral Agent, and Each Other
Guarantor party thereto (Incorporated by reference to Exhibit
10.3 of Amendment No. 1 to the Registration Statement on Form
S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.4
    
    Subordination and Intercreditor Agreement, dated October 1,
2010, among BlackRock Kelso Capital Corporation, PennantPark
Investment Corporation, Citibank, N.A. and THL Credit, Inc.,
CBay Inc., MedQuist Inc., MedQuist Transcriptions Ltd. and
General Electric Corporation (Incorporated by reference to
Exhibit 10.5 of Amendment No. 1 to the Registration Statement
on Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.5
    
    Agreement, dated August 19, 2008, between CBaySystems Holdings
Limited, S.A.C. PEI CB Investment II, LLC and Lehman Brothers
Commercial Corporation Asia Limited (Incorporated by reference
to Exhibit 10.6 of Amendment No. 2 to the Registration
Statement on Form S-1 of MedQuist Holdings Inc. (File No.
333-169997))10.6*
    
    Registration Rights Agreement, dated as of February 9, 2011,
among MedQuist Holdings, Inc., S.A.C. PEI CB Investment, L.P.,
S.A.C. PEI CB Investment II, LLC and International Equities
(S.A.C. Asia) Limited10.7*
    
    Stockholders Agreement, dated as of February 11, 2011, among
MedQuist Holdings Inc., S.A.C. PEI CB Investment, L.P., S.A.C.
PEI CB Investment II, LLC, International Equities (S.A.C.
Asia) Limited and the other signatories party thereto
 42




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##### Table of Contents



Number
    
    Description of Document10.8*
    
    Stockholders Agreement, dated as of February 9, 2011, among
MedQuist Holdings Inc., S.A.C. PEI CB Investment, L.P., S.A.C.
PEI CB Investment II, LLC and International Equities (S.A.C.
Asia) Limited10.9*
    
    Amended and Restated Management Stockholders Agreement10.10
    
    MedQuist Inc. 2002 Stock Option Plan (Incorporated by
reference to Exhibit 10.15 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.11
    
    Form of Stock Option Agreement under the MedQuist Inc. 2002
Stock Option Plan (Incorporated by reference to Exhibit 10.16
of Amendment No. 2 to the Registration Statement on Form S-1
of MedQuist Holdings Inc. (File No. 333-169997))10.12
    
    MedQuist Inc. Long-Term Incentive Plan adopted on August 27,
2009 (Incorporated by reference to Exhibit 10.17 of Amendment
No. 2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.13
    
    MedQuist Inc. Executive Deferred Compensation Plan, Amended
and restated, Effective November 15, 2001 (Incorporated by
reference to Exhibit 10.18 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.14
    
    MedQuist Transcriptions, Ltd. 2010 Management Incentive Plan
(Incorporated by reference to Exhibit 10.19 of Amendment No. 2
to the Registration Statement on Form S-1 of MedQuist Holdings
Inc. (File No. 333-169997))10.15
    
    CBaySystems Holdings Limited 2007 Equity Incentive Plan
(Incorporated by reference to Exhibit 10.11 of Amendment No. 2
to the Registration Statement on Form S-1 of MedQuist Holdings
Inc. (File No. 333-169997))10.16
    
    Form of Share Option Agreement in connection with the 2007
Equity Incentive Plan (Incorporated by reference to Exhibit
10.12 of Amendment No. 2 to the Registration Statement on Form
S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.17
    
    MedQuist Holdings Inc. 2010 Senior Executive Bonus Plan
(Incorporated by reference to Exhibit 10.19.1 of Amendment No.
5 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.18
    
    MedQuist Holdings Inc. 2010 Equity Incentive Plan
(Incorporated by reference to Exhibit 10.13 of Amendment No. 2
to the Registration Statement on Form S-1 of MedQuist Holdings
Inc. (File No. 333-169997))10.19
    
    MedQuist Holdings Inc. 2010 Employee Stock Purchase Plan
(Incorporated by reference to Exhibit 10.14 of Amendment No. 2
to the Registration Statement on Form S-1 of MedQuist Holdings
Inc. (File No. 333-169997))10.20
    
    Amended and Restated Stock Option Agreement by and between
Peter Masanotti and MedQuist Inc., dated March 2, 2009
(Incorporated by reference to Exhibit 10.20 of Amendment No. 2
to the Registration Statement on Form S-1 of MedQuist Holdings
Inc. (File No. 333-169997))
 43




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##### Table of Contents



Number
    
    Description of Document10.21
    
    Amended and Restated employment agreement by and between
CBaySystems Holdings Limited, CBay Inc., CBay Systems (India)
Pvt. Ltd. and V. Raman Kumar, dated as of December 6, 2010
(Incorporated by reference to Exhibit 10.21 of Amendment No. 5
to the Registration Statement on Form S-1 of MedQuist Holdings
Inc. (File No. 333-169997))10.22
    
    Employment agreement by and between CBaySystems Holdings
Limited, CBay Inc. and Robert Aquilina, dated as of August 8,
2008 (Incorporated by reference to Exhibit 10.22 of Amendment
No. 2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.23
    
    Employment agreement by and between CBaySystems Holdings
Limited, CBay Inc. and Michael Seedman, dated as of August 8,
2008 (Incorporated by reference to Exhibit 10.23 of Amendment
No. 2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.24
    
    Employment agreement by and between CBaySystems Holdings
Limited, CBay Inc. and Clyde Swoger, dated as of August 2008
(Incorporated by reference to Exhibit 10.24 of Amendment No. 2
to the Registration Statement on Form S-1 of MedQuist Holdings
Inc. (File No. 333-169997))10.25
    
    Employment Agreement by and between Peter Masanotti and
MedQuist Inc., dated September 3, 2008 (Incorporated by
reference to Exhibit 10.28 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.26
    
    Employment Agreement between Anthony D. James and MedQuist
Inc. for the position of Co-Chief Operating Officer dated June
24, 2010 (Incorporated by reference to Exhibit 10.29 of
Amendment No. 2 to the Registration Statement on Form S-1 of
MedQuist Holdings Inc. (File No. 333-169997))10.27
    
    Offer of Employment between MedQuist Inc. and Michael Clark
dated April 21, 2005 (Incorporated by reference to Exhibit
10.29.1 of Amendment No. 6 to the Registration Statement on
Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.28
    
    Form of 2010 Amendment to Employment Agreement dated as of
August 2008 (Incorporated by reference to Exhibit 10.25 of
Amendment No. 2 to the Registration Statement on Form S-1 of
MedQuist Holdings Inc. (File No. 333-169997))10.29
    
    Form of Letter of Appointment from CBaySystems Holdings
Limited to each non-executive director (Incorporated by
reference to Exhibit 10.26 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.30
    
    Form of Deed of Variation to Letter of Appointment between
each compensated non-executive director and CBaySystems
Holdings Limited (Incorporated by reference to Exhibit 10.27
of Amendment No. 2 to the Registration Statement on Form S-1
of MedQuist Holdings Inc. (File No. 333-169997))10.31
    
    Form of Indemnification Agreement between MedQuist Holdings
Inc. and certain Directors and Officers (Incorporated by
reference to Exhibit 10.30 of Amendment No. 5 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))
 44




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##### Table of Contents



Number
    
    Description of Document10.32
    
    Form of Management Indemnification Agreement by and between
MedQuist Inc. and Certain Officers (Incorporated by reference
to Exhibit 10.30.1 of Amendment No. 2 to the Registration
Statement on Form S-1 of MedQuist Holdings Inc. (File No.
333-169997))10.33
    
    First Amendment to the Form of Management Indemnification
Agreement by and between MedQuist Inc. and Certain Officers
(Incorporated by reference to Exhibit 10.30.2 of Amendment No.
2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.34
    
    Indemnification Agreement dated November 21, 2008 between
MedQuist Inc. and Peter Masanotti (Incorporated by reference
to Exhibit 10.31 of Amendment No. 2 to the Registration
Statement on Form S-1 of MedQuist Holdings Inc. (File No.
333-169997))10.35
    
    Office Lease, dated June 2006, between Ford Motor Land
Development Corporation and Spheris Operations Inc.
(Incorporated by reference to Exhibit 10.32.1 of Amendment No.
2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.36
    
    Amendment to Office Lease Agreement, dated March 27, 2009,
between Carothers Office Acquisition LLC and Spheris
Operations, Inc. (Incorporated by reference to Exhibit 10.32.2
of Amendment No. 2 to the Registration Statement on Form S-1
of MedQuist Holdings Inc. (File No. 333-169997))10.37
    
    Assignment, Assumption and Agreement to Relinquish Office
Space and Amendment to Office Lease Agreement, dated April 22,
2010 between Carothers Office Acquisition LLC and MedQuist
Transcriptions, Ltd. (Incorporated by reference to Exhibit
10.32.3 of Amendment No. 2 to the Registration Statement on
Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.38
    
    First Amendment to Lease Agreement, dated March 1, 2009, by
and between Atlanta Lakeside Real Estate, L.P. and MedQuist
Transcriptions, Ltd. (Incorporated by reference to Exhibit
10.33.1 of Amendment No. 2 to the Registration Statement on
Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.39
    
    Second Amendment to Lease Agreement, effective August 1,
2009, by and between Atlanta Lakeside Real Estate, L.P. and
MedQuist Transcriptions, Ltd. (Incorporated by reference to
Exhibit 10.33.2 of Amendment No. 2 to the Registration
Statement on Form S-1 of MedQuist Holdings Inc. (File No.
333-169997))10.40#
    
    Licensing Agreement, as amended, dated as of November 10,
2009, between MedQuist Inc. and Nuance Communications, Inc.
(Incorporated by reference to Exhibit 10.34 of Amendment No.
2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.41#
    
    Third Amended and Restated OEM Supply Agreement dated
November 10, 2009, between MedQuist Inc. and Nuance
Communications, Inc. (Incorporated by reference to Exhibit
10.35 of Amendment No. 2 to the Registration Statement on
Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.42#
    
    Licensing Agreement by and between Nuance Communications,
Inc. and MedQuist Inc., dated November 10, 2009 (Incorporated
by reference to Exhibit 10.36 of Amendment No. 5 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))
 45




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##### Table of Contents



Number
    
    Description of Document10.43#
    
    Amended and Restated Clinical Documentation Solution Agreement
by and between Multimodal Technologies, Inc. and MedQuist
Inc., dated March 25, 2010 (Incorporated by reference to
Exhibit 10.37 of Amendment No. 3 to the Registration Statement
on Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.44*
    
    Redemption Agreement among Lehman Brothers Commercial
Corporation Asia Limited, S.A.C. Private Equity Investors,
L.P., S.A.C. PEI CB Investment, L.P. and S.A.C. PEI CB
Investment GP, Limited and the Liquidators named therein21.1
    
    List of subsidiaries of MedQuist Holdings Inc. (Incorporated
by reference to Exhibit 21.1 of Amendment No. 6 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))31.1*
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2*
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1*
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith.
    
    Indicates management contract or compensatory plan or arrangement.#
    
    Portions of this exhibit were omitted and have been filed separately with the Secretary of
the Securities and Exchange Commission pursuant to the Registrants application requesting
confidential treatment under Rule 406 of the Securities Act. 46




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##### Table of Contents



SIGNATURES
  MedQuist Holdings Inc.By:
    /s/ Robert M. AquilinaRobert M. AquilinaChairman and Chief Executive Officer  By:
    /s/ Clyde SwogerClyde SwogerChief Financial Officer Date:
   Signature
    
    Capacity
    
    Date/s/ Robert M. Aquilina
    
    Chairman and Chief Executive Officer
(Principal Executive Officer)
    
    March 16, 2011/s/ V. Raman Kumar
    
    Vice Chairman and Director of
MedQuist Holdings Inc and Chief
Executive Officer of CBay India
    
    March 16, 2011/s/ Michael Seedman
    
    Chief Technology Officer and Director
    
    March 16, 2011/s/ Clyde Swoger
    
    Chief Financial Officer (Principal
Financial and Accounting Officer)
    
    March 16, 2011/s/ Frank Baker
    
    Director
    
    March 16, 2011/s/ Peter Berger
    
    Director
    
    March 16, 2011/s/ Jeffrey Hendren
    
    Director
    
    March 16, 2011/s/ Kenneth John McLachlan
    
    Director
    
    March 16, 2011
 47




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##### Table of Contents



Signature
    
    Capacity
    
    Date/s/
James Patrick Nolan
    
    Director
    
    March 16, 2011/s/
Merle Gilmore
    
    Director
    
    March 16, 2011
 48




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##### Table of Contents



Index to Consolidated Financial Statements
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Statements of Operations  Years ended December 31, 2010, 2009 and 2008
    
    
    F-3Consolidated Balance Sheets  As of December 31, 2010 and 2009
    
    
    F-4Consolidated Statements of Cash Flows  Years ended December 31, 2010, 2009 and 2008
    
    
    F-5Consolidated Statements of Equity and Comprehensive Income (Loss)  Years ended December 31, 2010, 2009 and 2008
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 F-1




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Report of Independent Registered Public Accounting Firm
 
    
 F-2




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##### Table of Contents



MedQuist Holdings Inc. and Subsidiaries
 
 Consolidated Statements of Operations
 (In thousands, except per share amounts)
 Years Ended December 31 ,2010
    
    
    2009
    
    
    2008Net revenues
    
    $
    417,326
    
    
    $
    353,932
    
    
    $
    171,413Cost of revenues
    
    
    259,194
    
    
    
    229,701
    
    
    
    113,127Gross Profit
    
    
    158,132
    
    
    
    124,231
    
    
    
    58,286Operating costs and expenses:Selling, general and administrative
    
    
    61,062
    
    
    
    53,089
    
    
    
    37,282Research and development
    
    
    12,030
    
    
    
    9,604
    
    
    
    6,099Depreciation and amortization
    
    
    32,617
    
    
    
    25,366
    
    
    
    13,488Cost of legal proceedings and settlements
    
    
    3,605
    
    
    
    14,943
    
    
    
    5,311Acquistion and integration related charges
    
    
    7,407
    
    
    
    1,246
    
    
    
    5,620Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    89,633Restructuring charges
    
    
    3,672
    
    
    
    2,727
    
    
    
    2,106Total operating costs and expenses
    
    
    120,393
    
    
    
    106,975
    
    
    
    159,539Operating income (loss)
    
    
    37,739
    
    
    
    17,256
    
    
    
    (101,253
    )Gain on sale of investment
    
    
    8,780
    
    
    
    
    
    
    
    Equity in income of affiliated company
    
    
    693
    
    
    
    1,933
    
    
    
    66Other income
    
    
    460
    
    
    
    13
    
    
    
    9Loss on extinguishment of debt
    
    
    (13,525
    )
    
    
    
    
    
    
    Interest expense, net
    
    
    (19,268
    )
    
    
    (9,019
    )
    
    
    (3,813
    )Income (loss) from continuing operations before income taxes and noncontrolling interests
    
    
    14,879
    
    
    
    10,183
    
    
    
    (104,991
    )Income tax provision (benefit)
    
    
    (2,312
    )
    
    
    1,012
    
    
    
    (5,531
    )Net income (loss) from continuing operations
    
    $
    17,191
    
    
    $
    9,171
    
    
    $
    (99,460
    )Discontinued OperationsIncome (loss) from discontinued Patient Financial Services business, net of tax
    
    
    556
    
    
    
    (1,351
    )
    
    
    (9,059
    )Income (loss) from discontinued operations
    
    
    556
    
    
    
    (1,351
    )
    
    
    (9,059
    )Net income (loss)
    
    
    17,747
    
    
    
    7,820
    
    
    
    (108,519
    )Less: Net income attributable to noncontrolling interests
    
    
    (9,240
    )
    
    
    (7,085
    )
    
    
    (5,154
    )Net income (loss) attributable to MedQuist Holdings Inc.
    
    $
    8,507
    
    
    $
    735
    
    
    $
    (113,673
    )Net income (loss) per common share from continuing operationsBasic
    
    $
    0.14
    
    
    $
    (0.02
    )
    
    $
    (4.68
    )Diluted
    
    $
    0.14
    
    
    $
    (0.02
    )
    
    $
    (4.68
    )Net income (loss) per common share from discontinued operationsBasic
    
    $
    0.02
    
    
    $
    (0.04
    )
    
    $
    (0.40
    )Diluted
    
    $
    0.02
    
    
    $
    (0.04
    )
    
    $
    (0.40
    )Net income (loss) per common share attributable to MedQuist Holdings IncBasic
    
    $
    0.16
    
    
    $
    (0.06
    )
    
    $
    (5.08
    )Diluted
    
    $
    0.16
    
    
    $
    (0.06
    )
    
    $
    (5.08
    )Weighted average shares outstanding:Basic
    
    
    35,102
    
    
    
    34,692
    
    
    
    22,593Diluted
    
    
    35,954
    
    
    
    34,692
    
    
    
    22,593
 The accompanying notes are an integral part of these consolidated financial statements.
 F-3




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##### Table of Contents



MedQuist Holdings Inc. and Subsidiaries
 
 Consolidated Balance Sheets
 (In thousands, except par value)
 December 31,
    
    
    December 31,2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    66,779
    
    
    $
    29,633Accounts receivable, net of allowance of $1,466 and $1,753, respectively
    
    
    82,038
    
    
    
    53,099Other current assets
    
    
    23,706
    
    
    
    8,739Total current assets
    
    
    172,523
    
    
    
    91,471Property and equipment, net
    
    
    23,018
    
    
    
    19,511Goodwill
    
    
    90,268
    
    
    
    53,187Other intangible assets, net
    
    
    107,962
    
    
    
    72,838Deferred income taxes
    
    
    6,896
    
    
    
    2,495Other assets
    
    
    14,212
    
    
    
    13,566Total assets
    
    $
    414,879
    
    
    $
    253,068Liabilities and EquityCurrent liabilities:Current portion of long term debt
    
    $
    27,817
    
    
    $
    6,207Accounts payable
    
    
    11,358
    
    
    
    11,191Accrued expenses and other current liability
    
    
    36,917
    
    
    
    29,803Accrued compensation
    
    
    16,911
    
    
    
    16,034Deferred revenue
    
    
    10,570
    
    
    
    9,924Total current liabilities
    
    
    103,573
    
    
    
    73,159Long term debt
    
    
    266,677
    
    
    
    101,133Deferred income taxes
    
    
    4,221
    
    
    
    2,166Due to related parties
    
    
    3,537
    
    
    
    2,185Other non-current liabilities
    
    
    2,360
    
    
    
    2,124Total liabilities
    
    
    380,368
    
    
    
    180,767Commitments and contingencies (Note 10)Total equity:Preferred stock  $0.10 par value; authorized 25,000 shares;
none issued or outstanding
    
    
    
    
    
    
    Common stock  $0.10 par value; authorized 300,000 shares;
35,158 and 35,013 shares issued and outstanding, respectively
    
    
    3,516
    
    
    
    3,501Additional paid in capital
    
    
    148,265
    
    
    
    149,339Accumulated deficit
    
    
    (107,179
    )
    
    
    (115,686
    )Accumulated other comprehensive loss
    
    
    (663
    )
    
    
    (174
    )Total
MedQuist Holdings Inc. stockholders equity
    
    
    43,939
    
    
    
    36,980Noncontrolling interests
    
    
    (9,428
    )
    
    
    35,321Total equity
    
    
    34,511
    
    
    
    72,301Total liabilities and equity
    
    $
    414,879
    
    
    $
    253,068
 The accompanying notes are an integral part of these consolidated financial statements.
 F-4




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##### Table of Contents



MedQuist Holdings Inc. and Subsidiaries
 
 Consolidated Statements of Cash Flows
 (In thousands)
 Years ended December 31,2010
    
    
    2009
    
    
    2008Operating activities:Net income (loss)
    
    $
    17,747
    
    
    $
    7,820
    
    
    $
    (108,519
    )Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:Depreciation and amortization
    
    
    33,454
    
    
    
    26,977
    
    
    
    14,906Gain on sale of investment
    
    
    (8,780
    )
    
    
    
    
    
    
    Equity in income of affiliated company
    
    
    (693
    )
    
    
    (1,933
    )
    
    
    (66
    )Goodwill impairment charge
    
    
    
    
    
    
    
    
    
    
    98,972Deferred income taxes
    
    
    (3,566
    )
    
    
    679
    
    
    
    (6,431
    )Share based compensation
    
    
    765
    
    
    
    856
    
    
    
    124Provision for doubtful accounts
    
    
    1,538
    
    
    
    2,306
    
    
    
    2,424Non-cash interest expense
    
    
    4,132
    
    
    
    3,272
    
    
    
    2,580Loss on extinquishment of debt
    
    
    13,525
    
    
    
    
    
    
    
    Other
    
    
    (963
    )
    
    
    200
    
    
    
    1,230Changes in operating assets and liabilities:Accounts receivable
    
    
    (9,962
    )
    
    
    3,816
    
    
    
    (483
    )Other current assets
    
    
    (1,858
    )
    
    
    2,185
    
    
    
    (96
    )Other non-current assets
    
    
    (495
    )
    
    
    (615
    )
    
    
    819Accounts payable
    
    
    981
    
    
    
    871
    
    
    
    2,011Accrued expenses
    
    
    (5,378
    )
    
    
    (3,634
    )
    
    
    (10,850
    )Accrued compensation
    
    
    (4,244
    )
    
    
    1,904
    
    
    
    2,150Deferred revenue
    
    
    569
    
    
    
    (2,128
    )
    
    
    3,398Other non-current liabilities
    
    
    (547
    )
    
    
    94
    
    
    
    (4,811
    )Net cash provided by (used in) operating activities
    
    $
    36,225
    
    
    $
    42,670
    
    
    $
    (2,642
    )Investing activities:Purchase of property and equipment
    
    
    (7,152
    )
    
    
    (6,475
    )
    
    
    (4,420
    )Proceeds from sale of investments
    
    
    19,469
    
    
    
    
    
    
    
    Capitalized software
    
    
    (7,155
    )
    
    
    (2,995
    )
    
    
    (2,738
    )Proceeds from sale of Patient Financial Services business
    
    
    12,547
    
    
    
    
    
    
    
    Payments for acquisitions and interests in affiliates, net of cash acquired
    
    
    (99,793
    )
    
    
    (2,690
    )
    
    
    (69,319
    )Net cash used in investing activities
    
    
    (82,084
    )
    
    
    (12,160
    )
    
    
    (76,477
    )Financing activities:Proceeds from debt
    
    
    392,352
    
    
    
    659
    
    
    
    866Repayment of debt
    
    
    (229,727
    )
    
    
    (28,613
    )
    
    
    (3,439
    )Dividends paid to noncontrolling interests
    
    
    (53,913
    )
    
    
    (15,256
    )
    
    
    Debt issuance costs
    
    
    (21,607
    )
    
    
    (1,201
    )
    
    
    Proceeds from issuance of stock
    
    
    
    
    
    
    
    
    
    
    124,000Payments related to initial public offering
    
    
    (3,745
    )
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    83,360
    
    
    
    (44,411
    )
    
    
    121,427Effect of exchange rate changes
    
    
    (355
    )
    
    
    666
    
    
    
    (2,107
    )Net increase (decrease) in cash and cash equivalents
    
    
    37,146
    
    
    
    (13,235
    )
    
    
    40,201Cash and cash equivalents  beginning of period
    
    
    29,633
    
    
    
    42,868
    
    
    
    2,667Cash and cash equivalents  end of period
    
    $
    66,779
    
    
    $
    29,633
    
    
    $
    42,868
 The accompanying notes are an integral part of these consolidated financial statements.
 F-5




---



##### Table of Contents



MedQuist Holdings Inc. and Subsidiaries
 
 Consolidated Statements of Equity and Comprehensive Income (Loss)
 (In thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    otherCommon Stock
    
    
    paid in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    comprehensive
    
    
    Noncontrolling
    
    
    TotalShares
    
    
    Amount
    
    
    capital
    
    
    (deficit)
    
    
    income (loss)
    
    
    income (loss)
    
    
    interests
    
    
    equityBalance, January 1, 2008
    
    
    14,444
    
    
    $
    1,444
    
    
    $
    29,934
    
    
    $
    (2,748
    )
    
    
    
    
    
    $
    848
    
    
    $
    375
    
    
    $
    29,853Issuance of common stock
    
    
    19,998
    
    
    
    2,000
    
    
    
    122,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,000Share based compensation
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20
    
    
    
    124Share of noncontrolling interest in MedQuist, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,740
    
    
    
    63,740Share of noncontrolling interest in goodwill
impairment charge in MedQuist, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,081
    )
    
    
    (25,081
    )Accrued payments to principal shareholders
    
    
    
    
    
    
    
    
    
    
    (1,113
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,113
    )Receivable related to offering
    
    
    
    
    
    
    
    
    
    
    (450
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (450
    )Components of comprehensive loss:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (113,673
    )
    
    
    (113,673
    )
    
    
    
    
    
    
    5,154
    
    
    
    (108,519
    )Foreign currency translation adjustment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,039
    )
    
    
    (2,039
    )
    
    
    (1,165
    )
    
    
    (3,204
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (115,712
    )Balance, December 31, 2008
    
    
    34,442
    
    
    $
    3,444
    
    
    $
    150,475
    
    
    $
    (116,421
    )
    
    
    
    
    
    $
    (1,191
    )
    
    
    43,043
    
    
    
    79,350Issuance of common stock
    
    
    571
    
    
    
    57
    
    
    
    1,621
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,678Accrued payments to principal shareholders
    
    
    
    
    
    
    
    
    
    
    (2,750
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,750
    )Share based compensation
    
    
    
    
    
    
    
    
    
    
    797
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    856Issuance of stock warrant
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61Dividend paid to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,256
    )
    
    
    (15,256
    )Acquisition of noncontrolling interest in subsidiary
    
    
    
    
    
    
    
    
    
    
    (690
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (690
    )Dilution of affiliated company
    
    
    
    
    
    
    
    
    
    
    (175
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    (252
    )Components of comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    735
    
    
    
    735
    
    
    
    
    
    
    
    7,085
    
    
    
    7,820Foreign currency translation adjustment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,017
    
    
    
    1,017
    
    
    
    467
    
    
    
    1,484Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,752
    
    
    
    
    
    
    
    Balance, December 31, 2009
    
    
    35,013
    
    
    $
    3,501
    
    
    $
    149,339
    
    
    $
    (115,686
    )
    
    
    
    
    
    $
    (174
    )
    
    $
    35,321
    
    
    $
    72,301Issuance of common stock
    
    
    145
    
    
    
    15
    
    
    
    1,382
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,397Share based compensation
    
    
    
    
    
    
    
    
    
    
    706
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59
    
    
    
    765Accrued payments to principal shareholders
    
    
    
    
    
    
    
    
    
    
    (2,750
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,750
    )Acquisition of interest in an affiliate
    
    
    
    
    
    
    
    
    
    
    (412
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (110
    )
    
    
    (522
    )Dividend paid to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53,913
    )
    
    
    (53,913
    )Components of comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,507
    
    
    
    8,507
    
    
    
    
    
    
    
    9,240
    
    
    
    17,747Foreign currency translation adjustment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (489
    )
    
    
    (489
    )
    
    
    (25
    )
    
    
    (514
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    8,018
    
    
    
    
    
    
    
    Balance, December 31, 2010
    
    
    35,158
    
    
    $
    3,516
    
    
    $
    148,265
    
    
    $
    (107,179
    )
    
    
    
    
    
    $
    (663
    )
    
    $
    (9,428
    )
    
    $
    34,511
 The accompanying notes are an integral part of these consolidated financial statements.
 F-6




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##### Table of Contents



1. Description of business and recent developments
   Our U.S. initial public offering
   Private Exchange
  Registered Exchange Offer
  F-7




---



##### Table of Contents



Sale of PFS business
  2. Significant accounting policies
 Principles of Consolidation
  Use of Estimates and Assumptions in the Preparation of Consolidated Financial Statements
  Revenue Recognition
   Sales Taxes
  Litigation and Settlement Costs
  Restructuring Costs
  F-8




---



##### Table of Contents



Research and Development Costs
  Income Taxes
  Share-based compensation
   Net income (loss) per share
   2010
    
    
    2009
    
    
    2008Net income (loss) attributable to MedQuist Holdings Inc.
    
    $
    8,507
    
    
    $
    735
    
    
    $
    (113,673
    )Less: amount payable to principal shareholders
    
    
    (2,750
    )
    
    
    (2,750
    )
    
    
    (1,113
    )Net income (loss) available for common shareholders
    
    $
    5,757
    
    
    $
    (2,015
    )
    
    $
    (114,786
    )Income (loss) from discontinued operations
    
    $
    556
    
    
    $
    (1,351
    )
    
    $
    (9,059
    )
 F-9




---



##### Table of Contents






2010
    
    
    2009
    
    
    2008Weighted average shares outstanding:Basic
    
    
    35,102
    
    
    
    34,692
    
    
    
    22,593Effect of dilutive stock
    
    
    852
    
    
    
    
    
    
    
    Diluted
    
    
    35,954
    
    
    
    34,692
    
    
    
    22,593Net income (loss) per share from continuing operationsBasic
    
    $
    0.14
    
    
    $
    (0.02
    )
    
    $
    (4.68
    )Diluted
    
    
    0.14
    
    
    
    (0.02
    )
    
    
    (4.68
    )Net income (loss) per common share from discontinued
operationsBasic
    
    
    0.02
    
    
    
    (0.04
    )
    
    
    (0.40
    )Diluted
    
    
    0.02
    
    
    
    (0.04
    )
    
    
    (0.40
    )Net income (loss) per common share attributable to
MedQuist Holdings Inc.Basic
    
    
    0.16
    
    
    
    (0.06
    )
    
    
    (5.08
    )Diluted
    
    
    0.16
    
    
    
    (0.06
    )
    
    
    (5.08
    )
  Advertising costs
  Cash and cash equivalents
   F-10




---



##### Table of Contents



Accounts Receivable and Allowance for Doubtful Accounts
    Valuation of long-lived and other intangible assets and goodwill
  Property and Equipment
  Software development
   Long-Lived and Other Intangible Assets
  F-11




---



##### Table of Contents



Foreign currency
   Business Enterprise Segments
  Concentration of Risk, Geographic Data and Enterprise-wide Disclosures
   Years ended December 31,2010
    
    
    2009
    
    
    2008Net revenuesMedical transcription
    
    
    91
    %
    
    
    88
    %
    
    
    90
    %Other
    
    
    9
    %
    
    
    12
    %
    
    
    10
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
   Years ended December 31,2010
    
    2009
    
    2008Net revenuesUnited States
    
    $
    411,015
    
    
    $
    342,783
    
    
    $
    167,916Other
    
    
    6,311
    
    
    
    11,149
    
    
    
    3,497Total
    
    $
    417,326
    
    
    $
    353,932
    
    
    $
    171,413
 At December 31,Long-lived
assets
    
    2010
    
    2009United States
    
    $
    16,233
    
    
    $
    13,765Other
    
    
    6,785
    
    
    
    5,746Total
    
    $
    23,018
    
    
    $
    19,511
 F-12




---



##### Table of Contents



Fair Value of Financial Instruments
  Comprehensive Income (Loss)
  Deferred equity offering costs
  Acquisition and integration related costs
  Operating leases
  Supplemental cash flow information
 Years ended December 31,2010
    
    2009
    
    2008Capital lease obligations incurred to acquire equipment
    
    $
    1,708
    
    
    $
    3,523
    
    
    $
    247Cash paid for interest
    
    
    14,878
    
    
    
    3,000
    
    
    
    862Cash paid for income taxes
    
    
    908
    
    
    
    796
    
    
    
    160Issuance of notes payable for acquisition of MedQuist Inc.
    
    
    
    
    
    
    
    
    
    
    117,179Assets acquired for settlement of receivables
    
    
    
    
    
    
    
    
    
    
    1,280Redemption of preferred stock for settlement of receivables
    
    
    
    
    
    
    
    
    
    
    1,565Accommodation payments paid with credits
    
    
    
    
    
    
    103
    
    
    
    Fees to principal shareholders by issuing common stock
    
    
    1,397
    
    
    
    1,678
    
    
    
    Conversion of interest on convertible notes to additional notes
    
    
    
    
    
    
    5,484
    
    
    
    Non cash debt incurred in connection with acquisition of Spheris
    
    
    13,570
    
    
    
    
    
    
    
    Note receivable from sale of PFS business
    
    
    1,350
    
    
    
    
    
    
    
    
  Recent Accounting Pronouncements
  Revenue RecognitionMultiple-Element Arrangements
 F-13




---



##### Table of Contents



Software-Revenue Recognition
  3. Acquisitions
 Acquisition of MedQuist Inc.
     Cash
    
    $
    98,079Issue of 6% Convertible note
    
    
    90,935Issue of Promissory Note (Bridge note)
    
    
    26,244Acquisition expenses
    
    
    24,446Total
    
    $
    239,704
  F-14




---



##### Table of Contents



Date ofacquisitionAugust 6, 2008Tangible assets
    
    $
    12,757Intangible assets
    
    
    71,599Current assets
    
    
    74,720Other assets
    
    
    6,756Current liabilities
    
    
    (44,337
    )Other liabilities
    
    
    (65
    )Net assets
    
    
    121,430Consideration paid
    
    
    239,704Goodwill
    
    $
    118,274
    Date ofacquisitionAugust 6, 2008Customer Relationships
    
    $
    40,380Trade Names
    
    
    21,892Developed Technology
    
    
    5,101Others
    
    
    4,226Total
    
    $
    71,599
 Acquisition of Spheris
  F-15




---



##### Table of Contents



Pro forma for yearsendedDecember 31,2010
    
    2009Net revenues
    
    $
    460,697
    
    
    $
    510,528Net income attributable to MedQuist Holdings Inc.
    
    
    16,331
    
    
    
    4,961Net income per share attributable to MedQuist Holdings Inc. from continuing operations (Basic)
    
    
    0.36
    
    
    
    0.10Net income per share attributable to MedQuist Holdings Inc. from continuing operations (Diluted)
    
    
    0.35
    
    
    
    0.10Net income per share attributable to MedQuist Holdings Inc. discontinued operations (Basic)
    
    
    0.03
    
    
    
    (0.04
    )Net income per share attributable to MedQuist Holdings Inc. discontinued operations (Diluted)
    
    
    0.03
    
    
    
    (0.04
    )Net income per share attributable to MedQuist Holdings Inc. (Basic)
    
    
    0.39
    
    
    
    0.06Net income per share attributable to MedQuist Holdings Inc. (Diluted)
    
    $
    0.38
    
    
    $
    0.06
    Cash consideration paid
    
    $
    98,834Fair value of unsecured Subordinated Promissory Note
    
    
    13,570Total consideration transferred
    
    $
    112,404
  Fair value of Spheris net assets acquiredCash
    
    $
    797Trade receivables
    
    
    22,407Other current assets
    
    
    4,142Property and equipment
    
    
    9,133
 F-16




---



##### Table of Contents



Deposits
    
    
    1,036Developed technology (included in intangibles)
    
    
    11,390Customer relationships (included in intangibles)
    
    
    37,210Trademarks and trade names (included in intangibles)
    
    
    1,640Goodwill
    
    
    44,917Trade and other payables
    
    
    (20,268
    )Identifiable assets acquired and liabilities assumed
    
    $
    112,404
  AmortizationperiodDeveloped technology
    
    9 yearsCustomer relationships
    
    8 yearsTrademarks and trade names
    
    4 yearsGoodwill
    
    Indefinite
    4. Debt
  F-17




---



##### Table of Contents



Years endedDecember 31,2010
    
    2009Current portion of Senior Secured Credit Facility
    
    $
    20,000
    
    
    $
    Short-term credit facilities
    
    
    3,597
    
    
    
    4,769Current portion of equipment loans from banks
    
    
    1,724
    
    
    
    621Current portion of capital lease obligations
    
    
    2,496
    
    
    
    817Total current portion of debt
    
    $
    27,817
    
    
    $
    6,207
  December 31,2010
    
    
    2009Senior Secured Credit Facility
    
    $
    200,000
    
    
    $
    Senior subordinated notes
    
    
    85,000
    
    
    
    Capital lease obligations
    
    
    3,779
    
    
    
    3,134Equipment loans from banks
    
    
    2,118
    
    
    
    3,0186% Convertible note
    
    
    
    
    
    
    96,419Short-term credit facilities
    
    
    3,597
    
    
    
    4,769Total debt
    
    
    294,494
    
    
    
    107,340Less: current portion
    
    
    27,817
    
    
    
    6,207Long-term debt, net of current portion
    
    $
    266,677
    
    
    $
    101,133
 Term Loans
  
    
    a $200.0 million term loan, advanced in one drawing on October 14, 2010 (the Closing
Date), with a term of five years, repayable in equal quarterly installments of $5.0
million, commencing on the first day of the first fiscal quarter beginning after the
Closing Date, with the balance payable at maturity; and
    
    a $25.0 million revolving credit facility under which borrowings may be made from
time to time during the period from the Closing Date until the fifth anniversary of the
Closing Date. The revolving facility includes a $5.0 million letter-of-credit
sub-facility and a $5 million swing line loan sub-facility.
 F-18




---



##### Table of Contents



F-19




---



##### Table of Contents



Credit facilities
 Line of credit  K Bank
  Credit agreement  ICICI Bank
  Credit Agreement  IndusInd Bank
  6% Convertible Note
     F-20




---



##### Table of Contents



Term and equipment loans
    2011
    
    $
    27,8172012
    
    
    20,9562013
    
    
    20,3912014
    
    
    20,3032015
    
    
    120,0272016
    
    
    85,000Total
    
    $
    294,494
  5. Allowance for doubtful accounts
  2010
    
    
    2009
    
    
    2008Beginning balance
    
    $
    1,753
    
    
    $
    1,713
    
    
    $
    43Charges to revenues and costs
    
    
    1,538
    
    
    
    2,306
    
    
    
    2,424Doubtful accounts written-off
    
    
    (1,825
    )
    
    
    (2,266
    )
    
    
    (754
    )Ending balance
    
    $
    1,466
    
    
    $
    1,753
    
    
    $
    1,713
  F-21




---



##### Table of Contents



6. Property and equipment
  2010
    
    
    2009Computer equipment
    
    $
    31,241
    
    
    $
    26,567Software
    
    
    5,305
    
    
    
    1,961Furniture and office equipment
    
    
    1,736
    
    
    
    1,495Leasehold improvements
    
    
    9,971
    
    
    
    4,869Other
    
    
    3,717
    
    
    
    2,831Total property and equipment
    
    
    51,970
    
    
    
    37,723Less: accumulated depreciation
    
    
    (28,952
    )
    
    
    (18,212
    )Property and equipment, net
    
    $
    23,018
    
    
    $
    19,511
  7. Goodwill and other intangible assets
  Goodwill
  2010
    
    
    2009Balance as of January 1,
    
    $
    152,159
    
    
    $
    148,915Accumulated impairment loss
    
    
    (98,972
    )
    
    
    (98,972
    )53,187
    
    
    
    49,943Goodwill from acquisitions
    
    
    45,747
    
    
    
    Contingent consideration
    
    
    
    
    
    
    3,100Sale of subsidiary
    
    
    (8,732
    )
    
    
    Foreign currency adjustments and other
    
    
    66
    
    
    
    144Balance at December 31,Goodwill
    
    
    189,240
    
    
    
    152,159Accumulated impairment losses
    
    
    (98,972
    )
    
    
    (98,972
    )Goodwill at period end
    
    $
    90,268
    
    
    $
    53,187
 F-22




---



##### Table of Contents



n

    
    First, the Company compares the carrying amount of the reporting units, which is the book
value to the fair value of its reporting unit. If the carrying amount of its reporting unit
exceeds its fair value, the Company has to perform the second step of the process. If not,
no further testing is needed. In the fourth quarter of 2008, the Company determined that the
carrying amount of two of its reporting units: MedQuist Inc. and PFS exceeded the fair value
and accordingly performed the second step in the analysis.n
    
    If the second part of the analysis is required, the Company allocates the fair value of
its reporting unit to all assets and liabilities as if the reporting unit had been acquired
in a business combination at the date of the impairment test. The Company then compares the
implied fair value of its reporting units goodwill to its carrying amount. If the carrying
amount of the Companys goodwill exceeds its implied fair value, the Company recognizes an
impairment loss in an amount equal to that excess.
  Other intangible assets
   n
    
    net book value compared to its fair value;n
    
    significant adverse economic and industry trends;
 F-23




---



##### Table of Contents



n
    
    significant decrease in the market value of the asset;n
    
    the extent that the Company uses an asset or changes in the manner that it uses it;n
    
    significant changes to the asset since acquired; andn
    
    other changes in circumstances that potentially indicate all or a portion of the company will be sold.
   2010Accumulated
    
    Net BookCost
    
    Amortization
    
    ValueCustomer lists
    
    $
    105,426
    
    
    $
    34,573
    
    
    $
    70,853Tradmarks and tradenames
    
    
    23,533
    
    
    
    8,414
    
    
    $
    15,119Internal use software
    
    
    15,150
    
    
    
    6,058
    
    
    $
    9,092Acquired technology
    
    
    16,491
    
    
    
    3,593
    
    
    $
    12,898Total
    
    $
    160,600
    
    
    $
    52,638
    
    
    $
    107,962
 F-24




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##### Table of Contents



2009AccumulatedCost
    
    Amortization
    
    Net Book ValueCustomer lists
    
    $
    63,722
    
    
    $
    15,853
    
    
    $
    47,869Tradmarks and tradenames
    
    
    21,893
    
    
    
    4,725
    
    
    
    17,168Internal use software
    
    
    6,977
    
    
    
    2,877
    
    
    
    4,100Acquired technology
    
    
    5,575
    
    
    
    1,874
    
    
    
    3,701Total
    
    $
    98,167
    
    
    $
    25,329
    
    
    $
    72,838
  WeightedEstimated
    
    averageuseful life
    
    remaining livesCustomer lists
    
    7-10 years
    
    7 yearsTradmarks and tradenames
    
    6-7 years
    
    5 yearsInternal use software
    
    3 years
    
    3 yearsAcquired technology
    
    3-5 years
    
    3 years
  2011
    
    $
    21,5422012
    
    
    20,4242013
    
    
    17,7102014
    
    
    15,8652015
    
    
    10,8212016 and thereafter
    
    
    21,600Total
    
    $
    107,962
 F-25




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##### Table of Contents



8. Contractual obligations
 Leases
  Capital
    
    
    Operatingleases
    
    
    leases2011
    
    $
    2,746
    
    
    $
    7,2302012
    
    
    852
    
    
    
    6,2902013
    
    
    390
    
    
    
    5,7662014
    
    
    278
    
    
    
    3,5612015 and thereafter
    
    
    
    
    
    
    6,097Total minimum lease payments
    
    $
    4,266
    
    
    $
    28,944Less: amount representing interest
    
    
    (487
    )Present value of net minimum lease payments
    
    
    3,779Less: Current portion of obligations under capital leases
    
    
    (2,496
    )Obligations, under capital leases, excluding current portion
    
    $
    1,283
 Other commitments  related party
  F-26




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##### Table of Contents



Other contractual obligations
  Severance andTotal
    
    
    Purchases
    
    
    other obligations2011
    
    $
    11,790
    
    
    $
    8,567
    
    
    $
    3,2232012
    
    
    8,248
    
    
    
    8,013
    
    
    
    2352013
    
    
    4,042
    
    
    
    3,807
    
    
    
    2352014
    
    
    1,170
    
    
    
    924
    
    
    
    2462015 and
thereafter
    
    
    21
    
    
    
    
    
    
    
    21Total
    
    $
    25,271
    
    
    $
    21,311
    
    
    $
    3,960
   9. Accrued expenses and other current liabilities
  As of December 31,2010
    
    
    2009Customer accommodations
    
    $
    10,387
    
    
    $
    11,635Accrued taxes
    
    
    5,422
    
    
    
    918Accrued interest
    
    
    5,593
    
    
    
    2,389Restructure liability
    
    
    2,245
    
    
    
    2,064Other accrued expenses
    
    
    13,270
    
    
    
    12,797Total accrued expenses
    
    $
    36,917
    
    
    $
    29,803
 F-27




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##### Table of Contents



December 31,2010
    
    
    2009Beginning balance
    
    $
    11,635
    
    
    $
    12,055Payments and other adjustments
    
    
    (1,248
    )
    
    
    (317
    )Credits
    
    
    
    
    
    
    (103
    )Ending balance
    
    $
    10,387
    
    
    $
    11,635
 10. Commitments and contingencies
 Kaiser litigation
  F-28




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##### Table of Contents



Kahn putative class action
  Reseller arbitration demand
   SEC investigation of former MedQuist Inc. officer
  Shareholder Litigation
    F-29




---



##### Table of Contents



11. Stock option plans
 2007 Equity incentive plan (the EI Plan)
       F-30




---



##### Table of Contents



Number of
    
    
    Weighted averageoptions
    
    
    exercise price (1)Outstanding at January 1, 2008
    
    
    886
    
    
    $
    7.11Granted
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Expired
    
    
    (604
    )
    
    
    6.75Outstanding at January 1, 2009
    
    
    282
    
    
    
    7.88Granted
    
    
    2,241
    
    
    
    5.00Forfeited
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Expired
    
    
    (51
    )
    
    
    7.88Outstanding at January 1, 2010
    
    
    2,472
    
    
    
    5.27Granted
    
    
    211
    
    
    
    9.89Forfeited
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Expired
    
    
    (46
    )
    
    
    7.88Outstanding at December 31, 2010
    
    
    2,637
    
    
    $
    5.50Exercisable at December 31, 2010
    
    
    1,732
    
    
    $
    5.33
 
 (1)
    
    Weighted average exercise prices are converted to U.S. dollars based on the exchange rate at
the end of the reporting period. F-31




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##### Table of Contents



WeightedaverageWeighted
    
    remaining
    
    
    
    
    
    Aggregate intrinsicOutstanding
    
    average
    
    contract
    
    Intrinsic
    
    value as ofoptions
    
    exercise price
    
    term (in years)
    
    value
    
    December 31, 2010Vested and exercisable at year end
    
    
    1,732
    
    
    $
    5.33
    
    
    
    7.36
    
    
    $
    4,951
    
    
    $
    4,951Expected to vest
    
    
    1,732
    
    
    $
    5.33
    
    
    
    7.36
    
    
    $
    4,951
    
    
    $
    4,951
  Dividend yield
    
    
    0
    %Expected life
    
    4.8  5.8 yearsRisk free interest rate
    
    
    4.42
    %Volatility
    
    
    34%35
    %
   Options Outstanding
    
    Options exercisableWeighted averageremaining
    
    Weighted
    
    
    
    
    
    WeightedNumber of
    
    contractual
    
    average
    
    Number of
    
    averageExercise price
    
    shares
    
    life (in years)
    
    exercise price
    
    shares
    
    exercise price$4.50  $9.00
    
    
    2,426
    
    
    
    7.41
    
    
    $
    5.12
    
    
    
    1,695
    
    
    $
    5.22$9.01  $13.50
    
    
    211
    
    
    
    9.46
    
    
    $
    9.89
    
    
    
    37
    
    
    $
    9.892,637
    
    
    
    7.58
    
    
    $
    5.50
    
    
    
    1,732
    
    
    $
    5.33
 MedQuist Inc. Stock option plan
  F-32




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##### Table of Contents



WeightedaverageremainingShare
    
    
    Weighted
    
    
    contractual
    
    
    Aggregatesubject to
    
    
    average
    
    
    life in
    
    
    intrinsicoptions
    
    
    exercise price
    
    
    years
    
    
    valueOutstanding, January 1, 2008
    
    
    2,359
    
    
    $
    31.08Granted
    
    
    296
    
    
    
    11.20Exercised
    
    
    (12
    )
    
    
    2.71Forfeited
    
    
    (827
    )
    
    
    29.10Outstanding, December 31, 2008
    
    
    1,816
    
    
    $
    23.34Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (553
    )
    
    
    22.57Outstanding, December 31, 2009
    
    
    1,263
    
    
    $
    24.47
    
    
    
    3.3
    
    
    $
    Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (261
    )
    
    
    44.84Outstanding, December 31, 2010
    
    
    1,002
    
    
    $
    17.39
    
    
    
    3.0
    
    
    $
    1,902Exercisable, December 31, 2010
    
    
    903
    
    
    $
    19.05
    
    
    
    2.5
    
    
    $
    1,268Options vested and expected to vest as of December 31, 2010
    
    
    1,002
    
    
    $
    17.39
    
    
    
    3.0
    
    
    $
    1,902
    F-33




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##### Table of Contents



Expected term (years)
    
    
    5.92Expected volatility
    
    
    54.5
    %Dividend yield
    
    
    0
    %Expected risk free interest rate
    
    
    3.25
    %
  n
    Expected term: The SEC Staff Accounting Bulletin No 107 Simplified method has been used
to determine a weighted average expected term of options granted.n
    Expected volatility: We have estimated expected volatility based on the historical stock
price volatility of a company of similar publicly traded companies.
We believe that the
MedQuist Inc. historical volatility is not indicative of future volatility.
     Options outstanding
    
    
    Options exercisableWeightedaverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedNumber
    
    
    remaining
    
    
    average
    
    
    Number
    
    
    averageof
    
    
    contractual life
    
    
    exercise
    
    
    of
    
    
    exerciseRange of exercise price
    
    shares
    
    
    (in years)
    
    
    price
    
    
    shares
    
    
    price$2.22-$10.00
    
    
    296
    
    
    
    7.8
    
    
    $
    2.22
    
    
    
    197
    
    
    $
    2.22$10.01-$20.00
    
    
    222
    
    
    
    1.6
    
    
    $
    17.16
    
    
    
    222
    
    
    $
    17.16$20.01-$30.00
    
    
    452
    
    
    
    0.8
    
    
    $
    26.29
    
    
    
    452
    
    
    $
    26.29$30.01-$40.00
    
    
    29
    
    
    
    0.0
    
    
    $
    32.36
    
    
    
    29
    
    
    $
    32.36$40.01-$70.00
    
    
    3
    
    
    
    0.1
    
    
    $
    44.21
    
    
    
    3
    
    
    $
    44.211,002
    
    
    
    3.0
    
    
    $
    17.39
    
    
    
    903
    
    
    $
    19.05
  F-34




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##### Table of Contents



Warrant
  12. Income taxes
  2010
    
    
    2009
    
    
    2008Income (loss) before income taxes and noncontrolling interest:Domestic
    
    $
    (1,382
    )
    
    $
    (2,510
    )
    
    $
    (775
    )Foreign
    
    
    16,261
    
    
    
    12,693
    
    
    
    (104,216
    )Income (loss) before income taxes and noncontrolling interest
    
    
    14,879
    
    
    
    10,183
    
    
    
    (104,991
    )Current income tax provision (benefit):Domestic
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    1,591
    
    
    
    317
    
    
    
    882Current income tax provision
    
    
    1,591
    
    
    
    317
    
    
    
    882Deferred income tax provision (benefit):Domestic
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    (3,903
    )
    
    
    695
    
    
    
    (6,413
    )Deferred income tax provisions (benefit)
    
    
    (3,903
    )
    
    
    695
    
    
    
    (6,413
    )Income tax provision (benefit)
    
    $
    (2,312
    )
    
    $
    1,012
    
    
    $
    (5,531
    )
 F-35




---



##### Table of Contents



2010
    
    2009
    
    2008Provision (benefit) at statutory tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    (35.0
    %)Valuation allowance
    
    
    (59.4
    %)
    
    
    (22.6
    %)
    
    
    20.6
    %Goodwill impairment
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    12.5
    %Foreign rate differential
    
    
    5.4
    %
    
    
    7.9
    %
    
    
    0.0
    %Adjustments to tax reserves
    
    
    (4.4
    %)
    
    
    (0.6
    %)
    
    
    0.3
    %Permanent differences
    
    
    4.1
    %
    
    
    (1.9
    %)
    
    
    0.2
    %Intercompany dividend
    
    
    0.0
    %
    
    
    3.8
    %
    
    
    0.0
    %State taxes
    
    
    4.2
    %
    
    
    (3.0
    %)
    
    
    (2.0
    %)Other, net
    
    
    (0.5
    %)
    
    
    (8.7
    %)
    
    
    (1.9
    %)Income tax provision (benefit)
    
    
    (15.6
    %)
    
    
    9.9
    %
    
    
    (5.3
    %)
  2010
    
    2009Deferred tax assetsForeign net operating loss carry forwards
    
    $
    51,860
    
    
    $
    54,734Accounts receivable
    
    
    1,231
    
    
    
    1,321Property and equipment
    
    
    2,821
    
    
    
    2,526Intangibles
    
    
    3,449
    
    
    
    6,499Employee compensation and benefit plans
    
    
    3,518
    
    
    
    1,770Deferred compensation
    
    
    36
    
    
    
    Customer accommodation
    
    
    3,470
    
    
    
    4,515Accruals and reserves
    
    
    2,269
    
    
    
    4Other
    
    
    5,704
    
    
    
    1,673Total gross deferred tax assets
    
    
    74,358
    
    
    
    76,558Less: Valuation allowance
    
    
    (63,097
    )
    
    
    (71,183
    )Total deferred tax assets
    
    $
    11,261
    
    
    $
    5,375Deferred tax liabilitiesProperty and equipment
    
    $
    (522
    )
    
    $
    (12
    )Intangibles
    
    
    (4,179
    )
    
    
    (4,085
    )Others
    
    
    (1,189
    )
    
    
    Total deferred tax liabilities
    
    
    (5,890
    )
    
    
    (4,097
    )Net deferred tax asset
    
    $
    5,371
    
    
    $
    1,278
  F-36




---



##### Table of Contents



Total unrecognized tax benefits as of January 1, 2009
    
    $
    5,090Gross amount of increases in unrecognized tax benefits as a result of tax positions taken during the prior period
    
    
    (9
    )Gross amount of increases in unrecognized tax benefits as a result of tax positions taken during the current period
    
    
    62Amount of decreases in the unrecognized tax benefits relating to settlements with taxing authorities
    
    
    Reduction to unrecognized tax benefits as a result of a lapse of applicable statute of limitations
    
    
    (130
    )Total unrecognized tax benefits as of December 31, 2009
    
    $
    5,013Total unrecognized tax benefits that would impact the effective tax rate if recognized
    
    $
    4,613Total amount of interest and penalties recognized in the accompanying consolidated statement of operations for the
year ended December 31, 2009
    
    $
    (126
    )Total amount of interest and penalties recognized in the accompanying consolidated balance sheet as of December
31, 2009
    
    $
    484Total unrecognized tax benefits as of January 1, 2010
    
    $
    5,013
 F-37




---



##### Table of Contents



Gross amount of increases in unrecognized tax benefits as a result of tax positions taken during the prior period
    
    
    5,086Gross amount of increases in unrecognized tax benefits as a result of tax positions taken during the current period
    
    
    575Amount of decreases in the unrecognized tax benefits relating to settlements with taxing authorities
    
    
    (826
    )Reduction to unrecognized tax benefits as a result of a lapse of applicable statute of limitation
    
    
    (38
    )Total unrecognized tax benefits as of December 31, 2010
    
    $
    9,810Total unrecognized tax benefits that would impact the effective tax rate if recognized
    
    $
    9,240Total amount of interest and penalties recognized in the accompanying consolidated statement of operations for the
year ended December 31, 2010
    
    $
    39Total amount of interest and penalties recognized in the accompanying consolidated balance sheet as of December
31, 2010
    
    $
    417
       13. Employee benefit plans
 401(k) plans of U.S. subsidiaries
 MedQuist Inc.  401(k) plan
  F-38




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##### Table of Contents



401(k) plan of other U.S. subsidiaries
  Indian subsidiary
 Gratuity
   Other benefit plans
  14. Related party transactions
 Transactions with affiliates of the companys majority shareholder
    Transactions with an entity under common control
  F-39




---



##### Table of Contents



Mirrus Systems Inc.
  Transactions with entities in which directors exercise significant influence
   Transactions with affiliated companies
   F-40




---



##### Table of Contents



15. Cost of legal proceedings and settlements
  Years endedDecember 31,2010
    
    
    2009
    
    
    2008Legal fees
    
    $
    2,695
    
    
    $
    8,593
    
    
    $
    5,311Other, including settlements
    
    
    910
    
    
    
    6,350
    
    
    
    Total
    
    $
    3,605
    
    
    $
    14,943
    
    
    $
    5,311
  16. Restructuring charges
 2010 Restructuring Plan
  Beginning balance
    
    $
    Charge
    
    
    4,303Cash paid
    
    
    (2,232
    )Ending balance
    
    $
    2,071
  2009 Restructuring Plan
  2010
    
    
    2009Beginning balance
    
    $
    2,064
    
    
    $
    Charge (reversal)
    
    
    (631
    )
    
    
    2,810Cash paid
    
    
    (1,259
    )
    
    
    (746
    )Ending balance
    
    $
    174
    
    
    $
    2,064
 F-41




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##### Table of Contents



17. Investments in affiliated companies
 A-Life Medical Inc. (A-Life)
  18. Sale of PFS business
   Years ended December 31,2010
    
    2009
    
    2008Net Revenue
    
    $
    13,113
    
    
    $
    17,836
    
    
    $
    22,260Income (loss) before taxes
    
    
    354
    
    
    
    (1,281
    )
    
    
    (8,926
    )Income tax (benefit) provision
    
    
    323
    
    
    
    70
    
    
    
    133Income (loss) from operations, net of taxes
    
    
    31
    
    
    
    (1,351
    )
    
    
    (9,059
    )Gain from sale of discontinued operation
    
    
    525
    
    
    
    
    
    
    
    Income from discontinued operation, net of tax
    
    
    556
    
    
    
    (1,351
    )
    
    
    (9,059
    )
  19. Quarterly financial information (unaudited)
  F-42




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##### Table of Contents



2010
    
    1st Quarter
    
    2nd Quarter
    
    3rd Quarter
    
    4th QuarterNet revenues
    
    $
    85,087
    
    
    $
    108,505
    (d)
    
    $
    113,200
    
    
    $
    110,534Gross profit
    
    $
    30,472
    
    
    $
    38,170
    
    
    $
    43,264
    
    
    $
    46,226Net income (loss) attributable to MedQuist Holdings Inc.
    
    $
    2,088
    
    
    $
    (1,535
    )
    
    $
    5,871
    
    
    $
    2,083
    (e)Net income (loss) per share from continuing operationsBasic
    
    $
    0.04
    
    
    $
    (0.07
    )
    
    $
    0.14
    
    
    $
    0.03Diluted
    
    $
    0.04
    
    
    $
    (0.07
    )
    
    $
    0.13
    
    
    $
    0.03Net income (loss) per share from discontinuing operationsBasic
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01Diluted
    
    $
    0.00
    
    
    $
    0.01
    
    
    $
    0.01
    
    
    $
    0.01Net income (loss) per share attributable to MedQuist Holdings Inc (c)Basic
    
    $
    0.04
    
    
    $
    (0.06
    )
    
    $
    0.15
    
    
    $
    0.04Diluted
    
    $
    0.04
    
    
    $
    (0.06
    )
    
    $
    0.14
    
    
    $
    0.04Weighted average shares outstanding:Basic
    
    
    35,013
    
    
    
    35,078
    
    
    
    35,158
    
    
    
    35,158Diluted
    
    
    35,182
    
    
    
    35,078
    
    
    
    48,926
    
    
    
    36,3702009Net revenues
    
    $
    89,907
    
    
    $
    89,142
    
    
    $
    89,071
    
    
    $
    85,812Gross profit
    
    $
    30,421
    
    
    $
    32,081
    
    
    $
    30,171
    
    
    $
    31,558Net income (loss) attributable to MedQuist Holdings Inc.
    
    $
    (3,223
    )(a)
    
    $
    393
    
    
    $
    2,603
    
    
    $
    962
    (b)Net income (loss) per share from continuing operationsBasic
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    0.07
    
    
    $
    0.01Diluted
    
    $
    (0.09
    )
    
    $
    0.00
    
    
    $
    0.07
    
    
    $
    0.01Net income (loss) per share from discontinuing operationsBasic
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    0.00Diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    0.00Net income (loss) per share attributable to MedQuist Holdings Inc.(c)Basic
    
    $
    (0.10
    )
    
    $
    (0.01
    )
    
    $
    0.05
    
    
    $
    0.01Diluted
    
    $
    (0.10
    )
    
    $
    (0.01
    )
    
    $
    0.05
    
    
    $
    0.01Weighted average shares outstanding:Basic
    
    
    34,442
    
    
    
    34,442
    
    
    
    34,873
    
    
    
    35,013Diluted
    
    
    34,442
    
    
    
    34,442
    
    
    
    34,873
    
    
    
    35,013
 
 (a)
    
    Includes $5,950 recorded in cost of legal proceedings and settlements related to the
settlement of all claims related to the Anthurium patent litigation settlement.(b)
    
    Includes $500 recorded in cost of legal proceedings and settlements related to the settlement
of all claims related to the reseller arbitration settlement.(c)
    
    The sum of quarterly net income (loss) per share may differ from the full year amount.(d)
    
    In April 2010, we completed the acquisition of Spheris.(e)
    
    Includes gain on sale of A-Life amounting to $8,780 and loss on extinguishment of debt amounting to $13,525. F-43




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Document3.1*
    
    Certificate of Incorporation3.2*
    
    By-Laws4.1
    
    Warrant Agreement, dated March 19, 2001, between MedQuist
Holdings Inc. and Oosterveld International BV (Incorporated
by reference to Exhibit 4.5 of Amendment No. 1 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))4.2
    
    Senior Subordinated Note Purchase Agreement, dated as of
September 30, 2010, among CBay Inc., MedQuist Inc. and
MedQuist Transcriptions Ltd., CBaySystems Holdings Limited,
BlackRock Kelso Capital Corporation, PennantPark Investment
Corporation, Citibank, N.A. and THL Credit Inc. (Incorporated
by reference to Exhibit 4.2 of Amendment No. 1 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))4.3
    
    Form of 13% Senior Subordinated Note due 2016 (included as
part of Exhibit 4.3 and incorporated herein by reference)4.4
    
    Guaranty Agreement, dated as of September 30, 2010, among
CBaySystems Holdings Limited, MedQuist IP LLC, MedQuist CM
LLC, MedQuist Delaware, Inc. and Each Other Guarantor From
Time to Time Party Hereto, BlackRock Kelso Capital
Corporation, PennantPark Investment Corporation, Citibank,
N.A. and THL Credit Inc. (Incorporated by reference to
Exhibit 10.4 of Amendment No. 1 to the Registration Statement
on Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))4.5
    
    Exchange Agreement, dated as of September 30, 2010, by and
between CBaySystems Holdings Limited and the Investors
signatories thereto (Incorporated by reference to Exhibit 4.4
of Amendment No. 2 to the Registration Statement on Form S-1
of MedQuist Holdings Inc. (File No. 333-169997))4.6
    
    Amendment No. 1 to the Exchange Agreement, dated as of
December 30, 2010, by and between CBaySystems Holdings
Limited and the Investors signatories thereto (Incorporated
by reference to Exhibit 4.4.1 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))9.1
    
    Voting Agreement, dated September 30, 2010, by and between
CBaySystems Holdings Limited, S.A.C. PEI CB Investment, L.P.,
S.A.C. PEI CB Investment II, LLC and International Equities
(S.A.C. Asia) Limited (Incorporated by reference to Exhibit
9.1 of Amendment No. 1 to the Registration Statement on Form
S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.1
    
    Stock and Asset Purchase Agreement, dated April 15, 2010,
between Spheris Holding II, Inc., Spheris Inc., Spheris
Operations LLC, Vianeta Communications, Spheris Leasing LLC,
Spheris Canada Inc., CBay Inc. and MedQuist Inc.
(Incorporated by reference to Exhibit 10.1 of Amendment No. 1
to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.2
    
    Credit Agreement, dated as of October 1, 2010, among CBay
Inc., MedQuist Inc. and MedQuist Transcriptions, Limited, as
Borrowers, CBaySystems Holdings Limited, as Holdings, the
Lenders and L/C Issuers party thereto, General Electric
Capital Corporation, as Administrative Agent and Collateral
Agent, SunTrust Bank, as Syndication Agent, and ING Capital
LLC and Regions Bank, as Co-Documentation Agents
(Incorporated by reference to Exhibit 10.2 of Amendment No. 1
to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))




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##### Table of Contents



ExhibitNumber
    
    Description of Document10.3
    
    Guaranty and Security Agreement, dated as of October 14,
2010, among CBay Inc., MedQuist Inc., MedQuist
Transcriptions, Limited, General Electric Capital
Corporation, as Administrative Agent and Collateral Agent,
and Each Other Guarantor party thereto (Incorporated by
reference to Exhibit 10.3 of Amendment No. 1 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.4
    
    Subordination and Intercreditor Agreement, dated October 1,
2010, among BlackRock Kelso Capital Corporation, PennantPark
Investment Corporation, Citibank, N.A. and THL Credit, Inc.,
CBay Inc., MedQuist Inc., MedQuist Transcriptions Ltd. and
General Electric Corporation (Incorporated by reference to
Exhibit 10.5 of Amendment No. 1 to the Registration Statement
on Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.5
    
    Agreement, dated August 19, 2008, between CBaySystems
Holdings Limited, S.A.C. PEI CB Investment II, LLC and Lehman
Brothers Commercial Corporation Asia Limited (Incorporated by
reference to Exhibit 10.6 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.6*
    
    Registration Rights Agreement,
dated as of February 4, 2011,
among MedQuist Holdings, Inc., S.A.C. PEI CB Investment,
L.P., S.A.C. PEI CB Investment II, LLC and International
Equities (S.A.C. Asia) Limited10.7*
    
    Stockholders Agreement, dated as of February 11, 2011, among
MedQuist Holdings Inc., S.A.C. PEI CB Investment, L.P.,
S.A.C. PEI CB Investment II, LLC, International Equities
(S.A.C. Asia) Limited and the other signatories party thereto10.8*
    
    Stockholders Agreement, dated as of
February 4, 2011, among
MedQuist Holdings Inc., S.A.C. PEI CB Investment, L.P.,
S.A.C. PEI CB Investment II, LLC and International Equities
(S.A.C. Asia) Limited10.9
    
    Form of Amended and Restated
Management Stockholders Agreement (Incorporated by reference to
Exhibit 10.10 of Amendment No. 5 to the Registration Statement on
Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.10
    
    MedQuist Inc. 2002 Stock Option Plan (Incorporated by
reference to Exhibit 10.15 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.11
    
    Form of Stock Option Agreement under the MedQuist Inc. 2002
Stock Option Plan (Incorporated by reference to Exhibit 10.16
of Amendment No. 2 to the Registration Statement on Form S-1
of MedQuist Holdings Inc. (File No. 333-169997))10.12
    
    MedQuist Inc. Long-Term Incentive Plan adopted on August 27,
2009 (Incorporated by reference to Exhibit 10.17 of Amendment
No. 2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.13
    
    MedQuist Inc. Executive Deferred Compensation Plan, Amended
and restated, Effective November 15, 2001 (Incorporated by
reference to Exhibit 10.18 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))




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##### Table of Contents



ExhibitNumber
    
    Description of Document10.14
    
    MedQuist Transcriptions, Ltd. 2010 Management Incentive Plan
(Incorporated by reference to Exhibit 10.19 of Amendment No.
2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.15
    
    CBaySystems Holdings Limited 2007 Equity Incentive Plan
(Incorporated by reference to Exhibit 10.11 of Amendment No.
2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.16
    
    Form of Share Option Agreement in connection with the 2007
Equity Incentive Plan (Incorporated by reference to Exhibit
10.12 of Amendment No. 2 to the Registration Statement on
Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.17
    
    MedQuist Holdings Inc. 2010 Senior Executive Bonus Plan
(Incorporated by reference to Exhibit 10.19.1 of Amendment
No. 5 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.18
    
    MedQuist Holdings Inc. 2010 Equity Incentive Plan
(Incorporated by reference to Exhibit 10.13 of Amendment No.
2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.19
    
    MedQuist Holdings Inc. 2010 Employee Stock Purchase Plan
(Incorporated by reference to Exhibit 10.14 of Amendment No.
2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.20
    
    Amended and Restated Stock Option Agreement by and between
Peter Masanotti and MedQuist Inc., dated March 2, 2009
(Incorporated by reference to Exhibit 10.20 of Amendment No.
2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.21
    
    Amended and Restated employment agreement by and between
CBaySystems Holdings Limited, CBay Inc., CBay Systems (India)
Pvt. Ltd. and V. Raman Kumar, dated as of December 6, 2010
(Incorporated by reference to Exhibit 10.21 of Amendment No.
5 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.22
    
    Employment agreement by and between CBaySystems Holdings
Limited, CBay Inc. and Robert Aquilina, dated as of August 8,
2008 (Incorporated by reference to Exhibit 10.22 of Amendment
No. 2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.23
    
    Employment agreement by and between CBaySystems Holdings
Limited, CBay Inc. and Michael Seedman, dated as of August 8,
2008 (Incorporated by reference to Exhibit 10.23 of Amendment
No. 2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.24
    
    Employment agreement by and between CBaySystems Holdings
Limited, CBay Inc. and Clyde Swoger, dated as of August 2008
(Incorporated by reference to Exhibit 10.24 of Amendment No.
2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.25
    
    Employment Agreement by and between Peter Masanotti and
MedQuist Inc., dated September 3, 2008 (Incorporated by
reference to Exhibit 10.28 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))




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##### Table of Contents



ExhibitNumber
    
    Description of Document10.26
    
    Employment Agreement between Anthony D. James and MedQuist
Inc. for the position of Co-Chief Operating Officer dated
June 24, 2010 (Incorporated by reference to Exhibit 10.29 of
Amendment No. 2 to the Registration Statement on Form S-1 of
MedQuist Holdings Inc. (File No. 333-169997))10.27
    
    Offer of Employment between MedQuist Inc. and Michael Clark
dated April 21, 2005 (Incorporated by reference to Exhibit
10.29.1 of Amendment No. 6 to the Registration Statement on
Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.28
    
    Form of 2010 Amendment to Employment Agreement dated as of
August 2008 (Incorporated by reference to Exhibit 10.25 of
Amendment No. 2 to the Registration Statement on Form S-1 of
MedQuist Holdings Inc. (File No. 333-169997))10.29
    
    Form of Letter of Appointment from CBaySystems Holdings
Limited to each non-executive director (Incorporated by
reference to Exhibit 10.26 of Amendment No. 2 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.30
    
    Form of Deed of Variation to Letter of Appointment between
each compensated non-executive director and CBaySystems
Holdings Limited (Incorporated by reference to Exhibit 10.27
of Amendment No. 2 to the Registration Statement on Form S-1
of MedQuist Holdings Inc. (File No. 333-169997))10.31
    
    Form of Indemnification Agreement between MedQuist Holdings
Inc. and certain Directors and Officers (Incorporated by
reference to Exhibit 10.30 of Amendment No. 5 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.32
    
    Form of Management Indemnification Agreement by and between
MedQuist Inc. and Certain Officers (Incorporated by reference
to Exhibit 10.30.1 of Amendment No. 2 to the Registration
Statement on Form S-1 of MedQuist Holdings Inc. (File No.
333-169997))10.33
    
    First Amendment to the Form of Management Indemnification
Agreement by and between MedQuist Inc. and Certain Officers
(Incorporated by reference to Exhibit 10.30.2 of Amendment
No. 2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.34
    
    Indemnification Agreement dated November 21, 2008 between
MedQuist Inc. and Peter Masanotti (Incorporated by reference
to Exhibit 10.31 of Amendment No. 2 to the Registration
Statement on Form S-1 of MedQuist Holdings Inc. (File No.
333-169997))10.35
    
    Office Lease, dated June 2006, between Ford Motor Land
Development Corporation and Spheris Operations Inc.
(Incorporated by reference to Exhibit 10.32.1 of Amendment
No. 2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.36
    
    Amendment to Office Lease Agreement, dated March 27, 2009,
between Carothers Office Acquisition LLC and Spheris
Operations, Inc. (Incorporated by reference to Exhibit
10.32.2 of Amendment No. 2 to the Registration Statement on
Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.37
    
    Assignment, Assumption and Agreement to Relinquish Office
Space and Amendment to Office Lease Agreement, dated April
22, 2010 between Carothers Office Acquisition LLC and
MedQuist Transcriptions, Ltd. (Incorporated by reference to
Exhibit 10.32.3 of Amendment No. 2 to the Registration
Statement on Form S-1 of MedQuist Holdings Inc. (File No.
333-169997))




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##### Table of Contents



ExhibitNumber
    
    Description of Document10.38
    
    First Amendment to Lease Agreement, dated March 1, 2009, by
and between Atlanta Lakeside Real Estate, L.P. and MedQuist
Transcriptions, Ltd. (Incorporated by reference to Exhibit
10.33.1 of Amendment No. 2 to the Registration Statement on
Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.39
    
    Second Amendment to Lease Agreement, effective August 1,
2009, by and between Atlanta Lakeside Real Estate, L.P. and
MedQuist Transcriptions, Ltd. (Incorporated by reference to
Exhibit 10.33.2 of Amendment No. 2 to the Registration
Statement on Form S-1 of MedQuist Holdings Inc. (File No.
333-169997))10.40#
    
    Licensing Agreement, as amended, dated as of November 10,
2009, between MedQuist Inc. and Nuance Communications, Inc.
(Incorporated by reference to Exhibit 10.34 of Amendment No.
2 to the Registration Statement on Form S-1 of MedQuist
Holdings Inc. (File No. 333-169997))10.41#
    
    Third Amended and Restated OEM Supply Agreement dated
November 10, 2009, between MedQuist Inc. and Nuance
Communications, Inc. (Incorporated by reference to Exhibit
10.35 of Amendment No. 2 to the Registration Statement on
Form S-1 of MedQuist Holdings Inc. (File No. 333-169997))10.42#
    
    Licensing Agreement by and between Nuance Communications,
Inc. and MedQuist Inc., dated November 10, 2009 (Incorporated
by reference to Exhibit 10.36 of Amendment No. 5 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.43#
    
    Amended and Restated Clinical Documentation Solution
Agreement by and between Multimodal Technologies, Inc. and
MedQuist Inc., dated March 25, 2010 (Incorporated by
reference to Exhibit 10.37 of Amendment No. 3 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))10.44*
    
    Redemption Agreement among Lehman Brothers Commercial
Corporation Asia Limited, S.A.C. Private Equity Investors,
L.P., S.A.C. PEI CB Investment, L.P. and S.A.C. PEI CB
Investment GP, Limited and the Liquidators named therein21.1
    
    List of subsidiaries of MedQuist Holdings Inc. (Incorporated
by reference to Exhibit 21.1 of Amendment No. 6 to the
Registration Statement on Form S-1 of MedQuist Holdings Inc.
(File No. 333-169997))31.1*
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2*
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1*
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith.
    
    Indicates management contract or compensatory plan or arrangement.#
    
    Portions of this exhibit were omitted and have been filed separately with the Secretary of
the Securities and Exchange Commission pursuant to the Registrants application requesting
confidential treatment under Rule 406 of the Securities Act.