14.

SHARE-BASED COMPENSATION

Overview of Share-Based Compensation Plan

The Company has granted incentive stock options and other equity awards pursuant to previously Board approved equity incentive plans. Most recently, the Company has granted equity awards pursuant to the Broadwind Energy, Inc.

2015

Equity Incentive Plan, which was approved by the Board in

February 2015

and by the Company's stockholders in

April 2015.

February 19, 2019,

the Board approved an Amended and Restated

2015

Equity Incentive Plan (as amended, the

“2015

EIP,”), which, among other things, increased the number of shares of our common stock authorized for issuance under the

2015

EIP from

1,100,000

2,200,000.

The amendment and restatement of the

2015

EIP was approved by the Company's stockholders at the

2019

Annual Meeting of Stockholders.

The purposes of the Company's equity incentive plans is (a) to align the interests of the Company's stockholders and recipients of awards by increasing the proprietary interest of such recipients in the Company's growth and success; (b) to advance the interests of the Company by attracting and retaining officers, other employees, non-employee directors and independent contractors; and (c) to motivate such persons to act in the long-term best interests of the Company and its stockholders. Under the

2015

EIP, the Company

may

grant (i) non-qualified stock options; (ii) “incentive stock options” (within the meaning of Section

422

of the IRC); (iii) stock appreciation rights; (iv) restricted stock and restrictive stock units; and (v) performance awards.

Stock Options.

The exercise price of stock options granted under the

2015

EIP is equal to the closing price of the Company's common stock on the date of grant. Stock options generally become exercisable on the anniversary of the grant date, with vesting terms that

may

range from

one

five

years from the date of grant. Additionally, stock options expire

ten

years after the date of grant. The fair value of stock options granted is expensed ratably over their vesting term.

Restricted Stock Units (RSUs).

The granting of RSUs is provided for under the

2015

EIP. RSUs generally contain a vesting period of

one

five

years from the date of grant. The fair value of each RSU granted is equal to the closing price of the Company's common stock on the date of grant and is generally expensed ratably over the vesting term of the RSU award.

Performance Awards (PSUs).

The granting of PSUs is provided for under the

2015

EIP. Vesting of PSUs is conditioned upon the Company meeting applicable performance measures over the performance period. The fair value of each PSU granted is equal to the closing price of the Company's common stock on the date of grant and is generally expensed ratably over the term of the PSU award plan.

The Company's equity incentive plans reserve shares of the Company's common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company and its affiliates depend to a large degree. The Company's equity incentive plans prior to the

2015

EIP had reserved

1,891,051

shares of the Company's common stock, and as of

December 31, 2020,

888,748

shares of common stock reserved for issuance under these plans had been issued in the form of common stock. As of

December 31, 2020,

shares of common stock are reserved for equity awards under these plans.

The

2015

EIP reserves

2,200,000

shares of the Company's common stock. As of

December 31, 2020,

856,095

shares of common stock reserved for issuance pursuant to stock options and RSU awards granted under the

2015

EIP had been issued in the form of common stock and

1,332,884

shares of common stock remained reserved for issuance of RSUs and PSUs outstanding under the

2015

EIP.

Stock option activity during the year ended

December 31, 2020

was as follows:

						Weighted Average		Aggregate Intrinsic
				Weighted Average		Remaining		Value
	Options			Exercise Price		Contractual Term		(in thousands)
Outstanding as of December 31, 2019		54,362		$	11.16		1.81	$	—
Forfeited		(54,362	)	$	11.16		—	$	—
Outstanding as of December 31, 2020		—		$	—		—	$	—
Exercisable as of December 31, 2020		—		$	—		—	$	—

There were

outstanding and exercisable stock options as of

December 31, 2020

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The determination of the fair value of each stock option is affected by the Company's stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are

not

limited to, the Company's expected stock price volatility over the expected life of the awards and actual and projected stock option exercise behavior. There were

stock options granted during the

twelve

months ended

December 31, 2020

and

2019

The following table summarizes information with respect to outstanding RSUs and PSUs as of

December 31, 2020

and

2019

				Weighted Average
				Grant-Date Fair Value
	Number of Shares			Per Share
Unvested as of December 31, 2019		1,356,915		$	2.39
Granted		517,082		$	1.59
Vested		(360,358	)	$	2.42
Forfeited		(180,755	)	$	3.84
Unvested as of December 31, 2020		1,332,884		$	1.86

RSUs and PSUs are generally subject to ratable vesting over a

three

-year period. Compensation expense related to these service-based awards is recognized on a straight-line basis over the vesting period. During the years ended

December 31, 2020

and

2019

, the Company utilized a forfeiture rate of

25%

for estimating the forfeitures of stock compensation granted.

The following table summarizes share-based compensation expense, net of taxes withheld, included in the Company's consolidated statements of operations for the years ended

December 31, 2020

and

2019

as follows:

	For the Years Ended
	December 31,
	2020		2019
Share-based compensation expense:
Cost of sales	$	106	$	99
Selling, general and administrative		1,050		859
Net effect of share-based compensation expense on net income	$	1,156	$	958
Reduction in earnings per share:
Basic earnings per share	$	0.07	$	0.06
Diluted earnings per share	$	0.07	$	0.06

(

)

Income tax benefit is

not

illustrated because the Company is currently in a full tax valuation allowance position and an actual income tax benefit was

not

realized for the years ended

December 31, 2020

and

2019

. The result of the income (loss) situation creates a timing difference, resulting in a deferred tax asset, which is fully reserved for in the Company's valuation allowance.

As of

December 31, 2020

, the Company estimates that pre-tax compensation expense for all unvested share-based RSUs and PSUs in the amount of approximately

$1,492

will be recognized through the year

2022.

The Company expects to satisfy the future distribution of shares of restricted stock by issuing new shares of common stock.