Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

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STOCK-BASED COMPENSATION
9 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION

12. STOCK-BASED COMPENSATION

 

In April 2014, the Company adopted the Medical Transcription Billing, Corp. 2014 Equity Incentive Plan (the “2014 Plan”), reserving 1,351,000 shares of common stock for grants to employees, officers, directors and consultants. During 2017, the 2014 Plan was amended and restated whereby an additional 1,500,000 shares of common stock and 100,000 shares of Preferred Stock were added to the plan for future issuance. The 2014 Plan was amended and restated on April 14, 2017 (the “Amended and Restated Equity Incentive Plan”). During 2018, an additional 200,000 of preferred shares were added to the plan for future issuance. In May 2020, an additional 2,000,000 shares of common stock and 300,000 shares of Preferred Stock were added to the plan for future issuance. As of September 30, 2021, 1,344,833 shares of common stock and 323,878 shares of Preferred Stock are available for grant. Permissible awards include incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, RSUs, performance stock and cash-settled awards and other stock-based awards in the discretion of the Compensation Committee of the Board of Directors including unrestricted stock grants.

 

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

 

Common and preferred stock RSUs

 

In January 2021, the Compensation Committee approved executive bonuses to be paid in shares of Preferred Stock, with the number of shares and the amount based on specified criteria being achieved during the year 2021. The actual amount will be settled in early 2022 based on the achievement of the specified criteria. For the nine months ended September 30, 2021, an expense of approximately $749,000 was recorded for these bonuses based on the value of the shares at the grant date and recognized over the service period. The portion of the stock compensation expense to be used for the payment of withholding and payroll taxes is included in accrued compensation in the condensed consolidated balance sheets. The balance of the stock compensation expense has been recorded as additional paid-in capital.

 

The following table summarizes the RSU transactions related to the common and preferred stock under the Equity Incentive Plan for the nine months ended September 30, 2021 and 2020:

 

    Common Stock     Preferred Stock  
Outstanding and unvested shares at January 1, 2021     382,435       44,000  
Granted     458,467       46,197  
Vested     (475,120 )     (56,197 )
Forfeited     (85,286 )     -  
Outstanding and unvested shares at September 30, 2021     280,496       34,000  
                 
Outstanding and unvested shares at January 1, 2020     451,085       44,000  
Granted     777,884       59,673  
Vested     (667,436 )     (59,673 )
Forfeited     (82,428 )     -  
Outstanding and unvested shares at September 30, 2020     479,105       44,000  

 

 

The total outstanding and unvested common stock RSUs at September 30, 2021 are classified as equity.

 

Stock-based compensation expense

 

The Company recognizes compensation expense on a straight-line basis over the total requisite service period for the entire award. For stock awards classified as equity, the market price of our common stock or preferred stock on the date of grant is used in recording the fair value of the award and includes the related taxes. For stock awards classified as a liability, the earned amount is marked to market based on the end of period common stock price. The liability for the cash-settled awards was approximately $559,000 and $976,000 at September 30, 2021 and December 31, 2020, respectively, and is included in accrued compensation in the condensed consolidated balance sheets.

 

The following table summarizes the components of share-based compensation expense for the three months and nine months ended September 30, 2021 and 2020:

 

 

Stock-based compensation included in the condensed consolidated statements of operations:   Three Months Ended September 30,    

Nine Months Ended

September 30,

 
    2021     2020     2021     2020  
    ($ in thousands)  
Direct operating costs   $ 207     $ 379     $ 766     $ 809  
General and administrative     737       819       2,482       2,887  
Research and development     (3 )     262       206       516  
Selling and marketing     63       303       552       739  
Total stock-based compensation expense   $ 1,004     $ 1,763     $ 4,006     $ 4,951