STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2023

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

12. STOCKHOLDERS’ EQUITY

Common Stock

On October 8, 2019, upon emergence from chapter 11 bankruptcy, Battalion filed an amended and restated certificate of incorporation with the Delaware Secretary of State to provide for, among other things, (i) the total number of shares of all classes of capital stock that Battalion has the authority to issue is 101,000,000 of which 100,000,000 shares are common stock, par value $0.0001 per share and 1,000,000 shares are preferred stock, par value $0.0001 per share and (ii) a restriction on Battalion from issuing any non-voting equity securities in violation of Section 1123(a)(6) of chapter 11 of title 11 of the United States Code. In addition, pursuant to the Company’s certificate of incorporation, effective at the 2021 annual meeting of stockholders, the board ceased to be divided into two classes, and the provision for the right of removal of any directors designated as a Group II director by an increased voting threshold from a majority to 85% of the shares then entitled to vote at an election of directors shares expired.

Incentive Plans

The Company’s board of directors adopted the 2020 Long-Term Incentive Plan (the “Plan”), as amended in 2021, in which an aggregate of approximately 1.8 million shares of the Company’s common stock were available for grant pursuant to awards under the Plan. As of December 31, 2023, a maximum of 1.1 million shares of the Company’s common stock remained reserved for issuance under the Plan. For the years ended December 31, 2023 and 2022, the Company recognized a benefit of $1.1 million and expense of $2.2 million, respectively, related to stock-based compensation awards granted to employees and directors, primarily related to restricted stock unit grants. The benefit recognized in the twelve months ended December 31, 2023 is due to forfeitures of stock options and restricted stock related to the departure of certain executives and employees. Stock-based compensation is recorded as a component of “General and administrative” on the consolidated statements of operations.

Restricted Stock Units

From time to time, the Company grants shares of restricted stock units (“RSUs”) under the Plan to employees of the Company. Under the Plan, employee RSUs will vest and convert to shares typically in equal amounts over a three or four year vesting period from the date of the grant, depending on award, or when the performance or market conditions described below occur. At December 31, 2023 and 2022, the Company had $0.3 million and $2.6 million, respectively of

unrecognized compensation expense related to non-vested RSU awards to be recognized over a weighted average period of 0.3 years and 1 year, respectively.

The following table sets forth the restricted stock unit transactions for the periods indicated:

	Number of Shares	Weighted Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value(1) (In thousands)
Unvested outstanding shares at December 31, 2021	775,515	$	9.16	$	2,914
Granted	225,700		13.75
Vested	(98,121)		11.40
Forfeited	(13,700)		12.20
Unvested outstanding shares at December 31, 2022	889,394	$	10.03	$	3,993
Granted	30,000		10.68
Vested	(158,845)		12.48
Forfeited	(509,013)		9.04
Unvested outstanding shares at December 31, 2023	251,536	$	10.56	$	1,141

(1) The intrinsic value of restricted stock was calculated as the closing market price on December 31, 2023 and 2022 of the underlying stock multiplied by the number of restricted shares that would be issuable. The total fair value of shares vested was $1.5 million for the year ended December 31, 2023.

The discussion below outlines the vesting conditions and fair values for each type of the Company’s approximately 0.3 million unvested outstanding RSU under the Plan issued to employees of the Company as of December 31, 2023.

● Time-Based RSUs. 0.1 million Time-Based RSUs will vest over a three or four year vesting period from the date of the grant, depending on award. The aggregate grant date fair value of these RSUs was $1.6 million.

● Performance-Based RSUs. Less than 0.1 million Performance-Based RSUs will vest in full only upon achievement of certain business combination goals, as defined in the awards agreements. The aggregate grant date fair value of these RSUs was $0.5 million. As of December 31, 2023, no expense had been recognized for these awards as a business combination, as defined in the award agreements, had not been consummated.

● Market-Based (e.g. TSR) RSUs. 0.1 million Market-Based RSUs will vest in full or in part or may terminate based on the Company’s total shareholder return (“TSR”) relative to the total shareholder return of certain of its peer companies as defined in the awards agreements over the performance period ending on February 20, 2024. The aggregate grant date fair value of these RSUs was $0.6 million.

The assumptions used in calculating the Monte Carlo valuation model fair value of the Company’s RSUs with market based (e.g. TSR) vesting conditions granted in 2020 are set forth in the following table:

	Year Ended
	December 31, 2020
Weighted average value per performance based RSUs granted during the period	$	6.13
Assumptions:
Stock price volatility(1)		51.79	%
Risk free rate of return		1.22	%

Expected term 3.9 years

(1) Due to the Company’s limited historical data, expected volatility was estimated using volatilities of peer entities as defined in the award agreements whose share prices and assumptions were publicly available.

Stock Options

From time to time, the Company has granted stock options under the Plan covering shares of common stock to employees of the Company. The Company has not granted stock options since 2020. Stock options, if exercised, are settled through the payment of the exercise price in exchange for new shares of stock underlying the option. Awards granted under the Plan typically vest over a four-year period at a rate of one-fourth on the annual anniversary date of the grant and expire seven years from the date of grant.

At December 31, 2023, the Company had 132,822 options outstanding (three equal tranches of 44,274 options at exercise prices of $18.91, $28.23, and $37.83 per share) with a weighted average exercise price of $28.32/share. As of December 31, 2023 and 2022, no options were either exercisable nor had intrinsic value due to service performance conditions and/or based on the exercise price of the option exceeding the closing market price. The weighted average remaining contractual life at December 31, 2023 was approximately 3.1 years. Approximately less than $0.1 million of unrecognized compensation expense remains related to non-vested stock-options to be recognized over a weighted-average period of 0.1 years.

The assumptions used in calculating the Black-Scholes-Merton valuation model fair value of the Company’s stock options granted in 2020 are set forth in the following table:

	Year Ended
	December 31, 2020
Weighted average value per option granted during the period	$	3.36
Assumptions:
Stock price volatility(1)		61.87	%
Risk free rate of return		1.21	%
Expected term		4.75	years

(1) Due to the Company’s limited historical data, expected volatility was estimated using volatilities of similar entities whose share or option prices and assumptions were publicly available.

Warrants

On October 8, 2019, pursuant to the Company’s plan of reorganization, approximately 6.9 million Series A, Series B and Series C warrants were issued to pre-emergence holders of the predecessor Company’s common stock with corresponding initial exercise prices ranging from $40.17 to $60.45 per share, on a pro rata basis. Each series of Warrants issued under the Warrant Agreement had a three-year term, which expired on October 8, 2022.