15. STOCK-BASED COMPENSATION

In April 2014, the Company adopted the Medical Transcription Billing, Corp. 2014 Equity Incentive Plan (the “Original Plan”), reserving a total of 1,351,000 shares of common stock for grants to employees, officers, directors and consultants. On April 14, 2017, the Original Plan was amended and restated whereby an additional 1,500,000 shares of common stock and 100,000 shares of Series A Preferred Stock were added to the plan for future issuance (the “A&R Plan”). During 2018, an additional 200,000 shares of Series A Preferred Stock were added to the A&R Plan for future issuance. In May 2020, an additional 2,000,000 shares of common stock and an additional 300,000 shares of Series A Preferred Stock were added to the A&R Plan for future issuance. During 2022, an additional 1,000,000 shares of common stock and 200,000 shares of Series B Preferred Stock were added to the A&R Plan for future issuance. As of December 31, 2022, 1,498,492 shares of common stock and 33,769 and 100,000 shares of Series A and Series B Preferred Stock, respectively, 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 common share per RSU, immediately after a change in control, as defined in the award agreement.

Common stock

During 2021, 628,361 RSUs of common stock were granted to employees and independent contractors to vest at different dates during the years 2021 through 2023. Included therein were 44,000 RSUs of common stock granted over two years equally to the four outside members of the Board of Directors with 25% of the shares vesting every six months.

During 2022, 777,715 RSUs of common stock were granted to employees and independent contractors to vest at different dates during the years 2022 through 2024. Included therein were 80,000 shares of common stock granted over two years equally to the four outside members of the Board of Directors with 25% of the shares vesting every six months.

During December 2022, it was agreed that certain bonuses to employees of medSR that were originally going to be paid in cash will be paid in common stock. The change of paying the bonuses in common stock resulted in approximately 135,000 shares being issued in February 2023. This change resulted in approximately $404,000 of stock compensation expense, which offset the amounts previously accrued.

The following table summarizes the RSU and restricted stock transactions related to the common and Preferred Stock under the A&R Plan for the years ended December 31, 2022 and 2021:

 DISCLOSURE OF SHARE-BASED COMPENSATION ARRANGEMENTS BY SHARE-BASED PAYMENT AWARD

As of December 31, 2022 and 2021, there was approximately $1.4 million and $3.7 million, respectively, of total unrecognized compensation cost related to the common stock RSUs classified as equity that will be expensed through 2024. As of December 31, 2022, there was approximately $557,000 of total unrecognized compensation cost related to the Series B Preferred Stock RSUs classified as equity that will be expensed through 2023. There was no unrecognized compensation cost related to the Series A Preferred Stock RSUs for both the years ended December 31, 2022 and 2021.

Of the total outstanding and unvested common stock RSUs at December 31, 2022 and 2021, 598,245 and 331,039 RSUs, respectively, are classified as equity and 47,230 and 87,000 RSUs, respectively, are classified as a liability. For both 2022 and 2021, all of the Preferred Stock RSUs are classified as equity.

The following table summarizes the share activity during the years ended December 31, 2022 and 2021 and the amount of common and preferred shares available for grant at December 31, 2022 and 2021:

 SCHEDULE OF SHARE-BASED COMPENSATION, RESTRICTED STOCK UNITS AWARD ACTIVITY

The liability for the cash-settled awards and accrued payroll taxes on equity awards was approximately $1.0 million at both December 31, 2022 and 2021, and is included in accrued compensation in the consolidated balance sheets. During the years ended December 31, 2022 and 2021, approximately $105,000 and $97,000, respectively, was paid in connection with the cash-settled awards.

Series A Preferred Stock

In 2021, the Compensation Committee approved executive bonuses to be paid in 34,000 shares of Series A Preferred Stock with the final number of shares and the amount based on specified performance criteria being achieved during 2021. Also in 2021, 16,010 shares of Series A Preferred Stock were granted as performance bonuses and in lieu of sales commissions. Stock-based compensation expense recorded during 2021 for these awards was approximately $1.5 million, based on the fair value of the Series A Preferred Shares on the grant date. During January 2022, the Compensation Committee determined that the financial objectives were attained and all of the performance bonus shares were issued.

Series B Preferred Stock

In February 2022, the Compensation Committee approved executive bonuses to be paid in 34,000 shares of Series B Preferred Stock, with the number of shares and the amount based on specified criteria being achieved during the year 2022. During February 2023, the Compensation Committee determined that the financial objectives were attained and all of the performance bonus shares were issued.

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 our Series A and Series B 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 weighted average grant date fair value of the common stock price in connection with the RSUs classified as equity was $4.27 and $9.16 for the years ended December 31, 2022 and 2021, respectively. The weighted average grant date fair value of the Series A Preferred Stock in connection with the RSUs was $26.69 and $28.52 for the years ended December 31, 2022 and 2021, respectively, and for the Series B Preferred Stock it was $25.24 for the year ended December 31, 2022. The following table summarizes the components of stock-based compensation expense for the years ended December 31, 2022 and 2021:

 SCHEDULE OF EMPLOYEE SERVICE SHARE-BASED COMPENSATION, ALLOCATION OF RECOGNIZED PERIOD COSTS