CareCloud, Inc. Stock Compensation Disclosure
In April 2014, the Company adopted the Medical Transcription Billing, Corp. 2014 Equity Incentive Plan (the “Original Plan”), reserving a total of 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 shares of common stock and shares of Series A Preferred Stock were added to the plan for future issuance (the “A&R Plan”). During 2018, an additional shares of Series A Preferred Stock were added to the A&R Plan for future issuance. In May 2020, an additional shares of common stock and an additional shares of Series A Preferred Stock were added to the A&R Plan for future issuance. During 2022, an additional shares of common stock and shares of Series B Preferred Stock were added to the A&R Plan for future issuance. As of December 31, 2024, shares of common stock, shares of Series A Preferred Stock and shares of Series B 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 common share per RSU, immediately after a change in control, as defined in the award agreement.
Common stock
During 2024, RSUs of common stock were granted to employees and independent contractors to vest at different dates during the years 2024 through 2026. Included therein were RSUs of common stock granted over two years equally to each of the five outside members of the Board of Directors with % of the shares vesting every six months. During 2023, RSUs of common stock were granted to employees and independent contractors to vest at different dates during the years 2023 through 2025. Included therein were RSUs of common stock granted over two years equally to each of the five outside members of the Board of Directors with % 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 would be paid in common stock. The change of paying the bonuses in common stock resulted in approximately shares being issued in February 2023. This change resulted in approximately $ of stock compensation expense, which offset the amounts previously accrued.
| Common Stock | Series A Preferred Stock | Series B Preferred Stock | ||||||||||
| Outstanding and unvested shares at January 1, 2024 | 753,495 | 57,199 | ||||||||||
| Granted | 226,894 | 46,000 | ||||||||||
| Vested | (513,190 | ) | (60,000 | ) | ||||||||
| Forfeited | (224,699 | ) | (24,000 | ) | ||||||||
| Outstanding and unvested shares at December 31, 2024 | 242,500 | 19,199 | ||||||||||
| Outstanding and unvested shares at January 1, 2023 | 645,475 | 80,462 | ||||||||||
| Granted | 1,098,976 | 62,000 | ||||||||||
| Vested | (896,893 | ) | (85,263 | ) | ||||||||
| Forfeited | (94,063 | ) | ||||||||||
| Outstanding and unvested shares at December 31, 2023 | 753,495 | 57,199 | ||||||||||
As of December 31, 2024 and 2023, there was approximately $ and $ million, respectively, of total unrecognized compensation cost related to the common stock RSUs classified as equity that will be expensed through 2026. As of December 31, 2024, there was unrecognized compensation cost as compared to approximately $ of total unrecognized compensation cost as of December 31, 2023 related to the Series B Preferred Stock RSUs classified as equity that was expensed through the following year. There was no unrecognized compensation cost related to the Series A Preferred Stock RSUs for both the years ended December 31, 2024 and 2023.
Of the total outstanding and unvested common stock RSUs at December 31, 2024, are classified as equity and at December 31 2023, RSUs are classified as equity and 19,587 RSUs are classified as a liability. For both 2024 and 2023, all of the Preferred Stock RSUs are classified as equity.
The following table summarizes the share activity during the years ended December 31, 2024 and 2023 and the amount of common and preferred shares available for grant at December 31, 2024 and 2023:
| Common Stock | Series A Preferred Stock | Series B Preferred Stock | ||||||||||
| Shares available for grant at January 1, 2024 | 493,579 | 33,769 | 38,000 | |||||||||
| RSUs granted | (226,894 | ) | (46,000 | ) | ||||||||
| RSUs forfeited | 232,998 | 24,000 | ||||||||||
| Shares available for grant at December 31, 2024 | 499,683 | 33,769 | 16,000 | |||||||||
| Shares available for grant at January 1, 2023 | 1,498,492 | 33,769 | 100,000 | |||||||||
| RSUs granted | (1,098,976 | ) | (62,000 | ) | ||||||||
| RSUs forfeited | 94,063 | |||||||||||
| Shares available for grant at December 31, 2023 | 493,579 | 33,769 | 38,000 | |||||||||
The liability for the cash-settled awards and accrued payroll taxes on equity awards was approximately $6,000 and $767,000 at December 31, 2024 and 2023, respectively, and is included in accrued compensation in the consolidated balance sheets. During the years ended December 31, 2024 and 2023, approximately $45,000 and $19,000, respectively, were paid in connection with the cash-settled awards.
Preferred Stock
In February 2023, the Compensation Committee granted executive bonuses to be paid in shares of Series B Preferred Stock, with the number of shares and the amount based on specified criteria being achieved during the year 2023. During October 2023, the Compensation Committee approved for issuance of the above shares to one of the executives who retired. The remaining shares were not issued and previously accrued amounts were reversed during 2024.
In March 2024, the Compensation Committee approved executive bonuses to be paid in shares of Series B Preferred Stock with the number of shares and the amount based on specified criteria being achieved for the year 2024. There were shares awarded. During May 2024, an additional executive bonus with similar terms was approved and shares were awarded. During December 2024, 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 Preferred Stock on the date of grant is used to record 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 $ and $ for the years ended December 31, 2024 and 2023, respectively. For the Series B Preferred Stock, the weighted average grant date fair value was $ and $ for the years ended December 31, 2024 and 2023, respectively. The following table summarizes the components of stock-based compensation expense for the years ended December 31, 2024 and 2023:
| Year Ended December 31, | ||||||||
| Stock-based compensation included in the consolidated statements of operations: | 2024 | 2023 | ||||||
| ($ in thousands) | ||||||||
| Direct operating costs | $ | (27 | ) | $ | 891 | |||
| General and administrative | 72 | 2,835 | ||||||
| Research and development | (4 | ) | 135 | |||||
| Selling and marketing | 74 | 855 | ||||||
| Lease terminations, unoccupied lease charges and restructuring costs | 170 | |||||||
| Total stock-based compensation expense | $ | 115 | $ | 4,886 | ||||
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.