Note 14 - Share-based Compensation

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

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. On 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 to 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. On February 7, 2021, the Board approved the Second Amendment to the Amended and Restated 2015 Equity Incentive Plan which, among other things, increased the number of shares of our common stock authorized for issuance under the 2015 EIP from 2,200,000 to 3,200,000. The Second Amendment to the amendment and restatement of the 2015 EIP was approved by the Company’s stockholders at the 2021 Annual Meeting of Stockholders.

The purposes of the Company’s equity incentive plans are (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 to 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 to 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 2015 EIP reserves 3,200,000 shares of the Company’s common stock. As of December 31, 2021, 1,317,031 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 918,448 shares of common stock remained reserved for issuance of RSUs and PSUs outstanding under the 2015 EIP.

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, 2021, 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, 2021, no shares of common stock are reserved for equity awards under these plans.

There was no stock option activity during the year ended  December 31, 2021 and no stock options were outstanding as of December 31, 2021. During 2020, 54,362 stock options were forfeited and there were no stock options outstanding at 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 no stock options granted during the twelve months ended December 31, 2021 and 2020.

The following table summarizes information with respect to outstanding RSUs and PSUs as of December 31, 2021 and 2020:

				Weighted Average
				Grant-Date Fair Value
	Number of Shares			Per Share
Unvested as of December 31, 2020		1,332,884		$	1.86
Granted		393,592		$	4.82
Vested		(695,216	)	$	1.92
Forfeited		(112,812	)	$	3.03
Unvested as of December 31, 2021		918,448		$	2.73

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, 2021 and 2020, 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, 2021 and 2020 as follows:

	For the Years Ended
	December 31,
	2021		2020
Share-based compensation expense:
Cost of sales	$	130	$	106
Selling, general and administrative		1,411		1,050
Net effect of share-based compensation expense on net income	$	1,541	$	1,156
Reduction in earnings per share:
Basic earnings per share	$	0.08	$	0.07
Diluted earnings per share	$	0.08	$	0.07

(1) 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, 2021 and 2020. 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, 2021, the Company estimates that pre-tax compensation expense for all unvested share-based RSUs and PSUs in the amount of approximately $1,177 will be recognized through the year 2023. The Company expects to satisfy the future distribution of shares of restricted stock by issuing new shares of common stock.