NOTE 13—STOCK‑BASED COMPENSATION

Description of the Plans

The Company has one equity incentive plan: the 2015 Equity Incentive Plan, as amended and restated on June 10, 2019, (the “2015 Plan”). The 2015 Plan allows for the issuance of up to 1,000,000 shares of stock awards to the Company’s employees and directors in the form of a variety of instruments, including stock options, restricted stock, restricted share units, stock appreciation rights and other share-based awards. The 2015 Plan also allows for cash-based awards. Generally, all participants who voluntarily terminate their employment with the Company forfeit 100% of all unvested equity awards. Persons who are terminated without cause, or in some cases leave for good reason, are entitled to proportionate vesting. Time-based proportionate vested shares are accelerated and distributed upon their termination date. Proportionate market-based and performance-based restricted shares remain categorized as unvested pending final conclusion on the achievement of the related awards. As of December 31, 2019, the Company had approximately 973,335 shares available for grant under the 2015 Plan.

During 2019 and 2018, the Company granted 143,000 and 967,029 restricted stock units, respectively, to certain employees outside of the 2015 Plan. All amounts and units described below include these awards.

Total stock‑based compensation expense during the years ended December 31, 2019 and 2018 was $1.6 million and $1.2 million, respectively, with no related excess tax benefit recognized, and was included in general and administrative expenses on the Company’s consolidated statements of operations. As of December 31, 2019, total unrecognized compensation expense related to all unvested restricted stock and restricted stock unit awards for which terms and conditions are known totaled $1.9 million, which is expected to be recognized over a weighted average period of 1.9 years. The fair value of shares that vested during 2019 and 2018 based on the stock price at the applicable vesting date was $0.7 million and $1.7 million, respectively. The weighted average grant date fair value of the Company’s restricted stock units was $2.29 and $2.07 for the years ended December 31, 2019 and 2018, respectively.

Service-Based Restricted Stock and Unit Awards: During 2019, the Company granted 358,613 service-based restricted stock units under the 2015 Plan at a grant date fair value of $2.35 per share. These service-based restricted stock units vest ratably over a three-year period beginning on March 31, 2020. The fair value of service-based restricted stock units represents the closing price of the Company’s common stock on the date of grant.

Additionally, during 2019, service-based restricted stock units of 21,500 and 100,000 were granted to certain employees outside of the 2015 Plan at a grant date fair value of $2.60 per share and $1.95 per share, respectively. These service-based restricted stock units generally vest over a period of three years and will be settled with treasury stock. The Company also granted 149,639 service-based restricted stock awards out of treasury stock to its five non-employee directors at a grant date fair value of $2.45 per share. The service-based restricted stock awards vest ratably over a four- year period beginning on January 22, 2020. The fair value of service-based restricted stock units and restricted stock awards represents the closing price of the Company’s common stock on the date of grant. These restricted stock units and restricted stock awards are accounted for as equity awards and are included in the table below.

During 2019 and 2018, certain service-based restricted stock units (the “modified service awards”) that were previously accounted for as liabilities totaling 62,962 and 210,668, respectively, vested. These awards were modified and settled, partially, with shares from the 2015 Plan and the remaining out of the Company’s treasury stock, which resulted in accounting for these awards under the equity method. The fair value of the modified service awards was based on the closing price of the Company’s stock on the modification date. The modification of these awards resulted in a $0.2 million and $0.3 million reduction in stock compensation expense for the years ended December 31, 2019 and 2018, respectively.

Information for service-based restricted stock and restricted stock units, excluding those accounted for as liability awards, is as follows:


		Weighted-Average
		Grant Date
	Shares	Fair Value per Share
Unvested restricted stock and restricted stock units at December 31, 2018	634,754		2.65
Granted	654,857		2.32
Vested	(375,515)		3.04
Modified	62,962		4.30
Forfeited	(54,556)		2.50
Unvested restricted stock and restricted stock units at December 31, 2019	922,502	$	2.41

Market-Based Restricted Stock Unit Awards: During 2019, market-based restricted stock units of 21,500 were granted to certain employees outside of the 2015 Plan and will be settled with treasury stock. The 2019 units contain a market condition based on a stock price goal. The stock price goal will be met if the Company’s common stock price per share equals or exceeds $5.00 for any period of 30 consecutive trading days during a three-year period ending on March 31, 2021. These restricted stock units will vest ratably over a period of three years if the stock price goal is met on or before March 31, 2019. However, if the stock price goal is achieved after March 31, 2019 and on or prior to March 31, 2020, the restricted stock units will vest in three installments, with one-third vesting on the date the stock price goal is met, one-third vesting on March 31, 2020 and one-third vesting on March 31, 2021. Further, if the stock price goal is achieved after March 31, 2020 and on or prior to March 31, 2021, the restricted stock units will vest in two installments, with two-thirds vesting on the date the stock price goal is met and one-third vesting on March 31, 2021. If the stock price goal is met after March 31, 2021 and during the three-year implied service period, the restricted stock units will vest in full on the date that the stock price goal is met.

Information for market-based restricted stock units is as follows:


		Weighted-Average
		Grant Date
	Shares	Fair Value per Share
Unvested restricted stock units at December 31, 2018	620,457	$	1.72
Granted	21,500		0.75
Vested	—		—
Modified	—		—
Forfeited	(21,808)		0.94
Unvested restricted stock units at December 31, 2019	620,149	$	1.79

The Company estimates the fair value of its market‑based restricted stock unit awards on the date of grant using a Monte Carlo simulation valuation model. This pricing model uses multiple simulations to evaluate the likelihood of achieving the market conditions set forth in the award agreements. Expense is only recorded for the number of market‑based restricted stock unit awards granted. The assumptions used to estimate the fair value of market‑based restricted stock unit awards granted during 2019 and accounted for under the equity method were as follows:


Expected term (years)		2.46
Expected volatility		37.0	%
Expected dividend yield		0.00	%
Risk-free interest rate		2.52	%
Weighted-average grant date fair value	$	0.75

Performance-based awards: During 2019, the Company granted cash-based performance awards under the 2015 Plan valued at $1.7 million. At the Company’s discretion, these performance-based restricted stock awards can be settled in cash or shares. The performance objectives associated with these awards are established by the Compensation Committee of the Board of Directors (the “Compensation Committee”) on an annual basis. For the 2019 performance period, the performance objective is based on the Company’s backlog performance target as of December 31, 2019. Performance objectives for the two succeeding years will be established by the Compensation Committee in the respective performance period. Award payouts range from a threshold of 50% to a maximum of 200% for each respective annual performance period. Because the Company intends to settle the cash-based performance awards that are scheduled vest on March 31, 2020 with shares, the fair value of the cash-based performance awards with an established 2019 performance objective represents the closing price of the Company’s common stock on the date of grant. The fair value of the cash-based performance awards that are scheduled to vest on March 31, 2021 and 2022 will be measured in the year that the respective performance objective is established and approved by the Compensation Committee. The Company recognizes stock-based compensation expense related to its cash-based performance awards based on its determination of the likelihood of achieving the performance objective. The Company reassesses the likelihood of meeting the specified performance objective at the end of each reporting period and adjusts compensation expense, as necessary, based on the likelihood of achieving the performance objective.

Cash-based awards: During 2017, cash-based awards totaling $0.9 million were awarded to employees. The cash-based awards granted to employees generally vest over a period of two years and are accounted for as liability awards. As of December 31, 2018, the Company had a $0.2 million liability related to this award which was included in other current liabilities on the consolidated balance sheet. No cash-based awards were granted in 2019 or 2018.

Stock Options: During 2015, the Company granted a stock option to purchase 122,000 shares of its common stock to its former chief executive officer at an exercise price of $13.85 per share. The option provides for immediate vesting of 32,000 shares, with the remaining 90,000 vesting ratably over a ten month period beginning in June 2015 and has a five year term. This is the only stock option grant the Company has made to date.

The following table summarizes stock option activity for the year ended December 31, 2019:


		Weighted-Average		Weighted-Average
	Options	Exercise Price		Remaining Contract Term
Outstanding at December 31, 2018	122,000	$	13.85
Outstanding at December 31, 2019	122,000	$	13.85		2.625 years
Exercisable at December 31, 2019	122,000	$	13.85		2.625 years

The weighted average fair value of the stock option on the date of the grant was $2.58. The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model. The exercise price of the options is based on the fair market value of the common shares on the date of grant.

Cash flows resulting from excess tax benefits are classified as part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for vested restricted stock and restricted stock unit awards, and exercised options in excess of the deferred tax asset attributable to stock compensation costs for such equity awards. The Company realized no excess tax benefits for the years ended December 31, 2019 and 2018 due to the use of NOL carryforwards.