Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Sep. 30, 2021
Leases [Abstract]  



We determine if an arrangement is a lease at inception. We have operating leases for office and temporary living space as well as for some office equipment. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liability and non-current operating lease liability in our condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020. Each time the Company acquires a business, the ROU assets and the lease liabilities are recorded at fair value as of the date of acquisition. The Company does not have any finance leases.


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


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


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


If a lease is modified after the effective date, the operating lease ROU asset and liability are re-measured using the current incremental borrowing rate. During the nine months ended September 30, 2021, there was $686,000 of unoccupied lease charges for two of the Company’s facilities. During the nine months ended September 30, 2020, there was approximately $300,000 of unoccupied lease charges. Additionally, during 2020, there was a lease impairment of approximately $383,000 since the Company is no longer using one of its leased facilities.


In February 2021, the Company was able to settle one of the lease obligations assumed in connection with the Meridian acquisition for an amount that approximated the remaining lease liability.


During the current quarter, the Company decided to terminate one of its leases in Pakistan which, with a modification, will expire as of the end of the year. The Company does not intend to renew this lease and will consolidate its employees into the remaining facilities. As a result of the termination, the Company incurred a loss of approximately $18,000 which has been included in loss on lease termination, impairment and unoccupied lease charges in the September 30, 2021 condensed consolidated statement of operations.


Lease expense is included in direct operating costs and general and administrative expenses in the condensed consolidated statements of operations based on the nature of the expense. As of September 30, 2021, we had 37 leased properties, six in Medical Practice Management and 31 in Healthcare IT, with remaining terms ranging from less than one year to five years. Our lease terms are determined taking into account lease renewal options, the Company’s anticipated operating plans and leases that are on a month-to-month basis. The Company also has some related party leases – see Note 9.


The components of lease expense were as follows:


      2021       2020       2021       2020  
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
    2021     2020     2021     2020  
    ($ in thousands)  
Operating lease cost   $ 1,066     $ 1,227     $ 3,181     $ 2,861  
Short-term lease cost     22       25       65       36  
Variable lease cost     11       7       25       22  
Total- net lease cost   $ 1,099     $ 1,259     $ 3,271     $ 2,919  



Short-term lease cost represents leases that were not capitalized as the lease term as of the later of January 1, 2021 or the beginning of the lease was less than 12 months. Variable lease costs include utilities, real estate taxes and common area maintenance costs.


Supplemental balance sheet information related to leases is as follows:


      1       2  
    September 30, 2021     December 31, 2020  
    ($ in thousands)  
Operating leases:                
Operating lease ROU assets, net   $ 7,108     $ 7,743  
Current operating lease liabilities   $ 3,929     $ 4,729  
Non-current operating lease liabilities     5,026       6,297  
Total operating lease liabilities   $ 8,955     $ 11,026  
Operating leases:                
ROU assets   $ 9,310     $ 10,648  
Asset lease expense     (2,191 )     (2,889 )
Foreign exchange gain (loss)     (11 )     (16 )
ROU assets, net   $ 7,108     $ 7,743  
Weighted average remaining lease term (in years):                
Operating leases     4.41       2.71  
Weighted average discount rate:                
Operating leases     6.78 %     6.76 %


Supplemental cash flow and other information related to leases is as follows:


      2021       2020       2021       2020  
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
    2021     2020     2021     2020  
    ($ in thousands)  
Cash paid for amounts included in the measurement of lease liabilities:                                
Operating cash flows from operating leases   $ 1,316     $ 1,417     $ 4,048     $ 2,860  
ROU assets obtained in exchange for lease liabilities:                                
Operating leases, net of impairment and terminations   $ 315     $ 203     $ 2,063     $ 6,467  



Maturities of lease liabilities are as follows:


Operating leases - Year ending December 31,   ($ in thousands)  
2021 (three months)   $ 1,253  
2022     4,115  
2023     2,024  
2024     789  
2025     481  
Thereafter     1,972  
Total lease payments     10,634  
Less: imputed interest     (1,679 )
Total lease obligations     8,955  
Less: current obligations     (3,929 )
Long-term lease obligations   $ 5,026  


As of September 30, 2021, we have one operating lease commitment that has not yet commenced with an aggregate gross lease liability of approximately $99,000.