Stock Incentive Plans

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Stock Incentive PlansOn December 15, 2016, the Company’s shareholders approved the 2016 Equity Compensation Plan (the “2016 Plan”) and the Company registered 764,087 shares of common stock adjusted for the Reverse Stock Split, which may be issued under the 2016 Plan. On June 7, 2019, the Company's shareholders approved an amendment and restatement of the 2016 Plan, which increased the number of shares reserved under the 2016 Plan by an additional 357,142 shares to a maximum of 1,121,229 shares of common stock. Any director, officer, employee or consultant of the Company or any of its subsidiaries (including any prospective officer or employee) is eligible to be designated to participate in the 2016 Plan. The Company withheld shares related to restricted stock awards that vested in 2021 at the fair market value equivalent to the maximum statutory withholding obligation and remitted that amount in cash to the appropriate taxation authorities.

On February 19, 2021, the Company granted 92,327 restricted shares as a company-wide grant under the 2016 Plan. The fair value of the grant based on the closing share price on February 19, 2021 was $2.8 million. The shares will vest in equal installments over a three-year term. Additionally, the Company granted 4,341 shares of fully vested common stock to its board of directors. The fair value of the director grant based on the closing share price of February 19, 2021 was $0.1 million. The amortization of the above grants is $0.4 million and $1.3 million for the three and nine months ended September 30, 2021, which is included in General and administrative expenses in the Condensed Consolidated Statements of Operations.

On September 3, 2021, the Company granted 17,727 shares of time-based awards to certain members of its senior management team under the 2016 Plan. The awards vest in three equal installments on September 3, 2022, September 3, 2023 and September 3, 2024. The aggregate fair value of these awards based on the closing share price on September 3, 2021 was $0.9 million. The amortization of the above grant is $0.05 million for the three and nine months ended September 30, 2021, which is included in General and administrative expenses in the Condensed Consolidated Statements of Operations.

Also on September 3, 2021, the Company granted performance based restricted stock grants to certain members of its senior management team under the 2016 Plan which are contingent on certain performance criteria. The maximum number of performance-based stock awards that can be issued are 53,182.

Of the maximum 53,182 performance-based stock awards granted, 35,454 shares at maximum were granted based on earnings per share ("EPS performance") for the year ending December 31, 2021 (with targets set forth earlier in the year). Restricted shares which will vest in three equal installments (subject to achievement of performance criteria) on September 3, 2022, September 3, 2023 and September 3, 2024. The aggregate fair value of these awards based on the closing share price on September 3, 2021 was $1.8 million. The EPS performance is considered to be a performance condition under ASC 718 "Share based payment awards" and therefore the stock based compensation expense is recorded based on the probable outcome that the performance condition will be achieved. As of September 30, 2021, the Company estimated that the performance condition will be met and recorded $0.1 million as stock based compensation expense which is included in General and administrative expenses in its Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2021.

Of the maximum 53,182 performance-based stock awards granted, 17,728 shares at maximum were granted based on relative total shareholder return ("TSR performance") for the year ending December 31, 2021. Restricted shares which will vest in three equal installments on September 3, 2022, September 3, 2023 and September 3, 2024. All the vested TSR performance shares are subject to a 1-year holding period after vesting. The TSR performance is based on the Company's total shareholder return compared to 7 peer companies over the performance period which ranges between January 1, 2021 and December 31, 2021. The TSR performance is calculated based average daily closing stock price over a 20-trading-day period at the beginning and ending of the performance period. The aggregate fair value of the TSR performance awards, which was calculated using a Monte Carlo simulation model, was $0.5 million. The assumptions used in the model were risk-free rate of return of 0.05% based on 4-month treasury rates as of September 3, 2021; expected volatility of 55.66% based on 1-year historical daily volatility of the closing share prices for the Company; and 8.1% discount applied for the 1-year holding period using the Finnerty model. The Company recorded $0.02 million as stock-based compensation expense which is included in General and administrative expenses in its Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2021.

As of September 30, 2021 and December 31, 2020, stock awards covering a total of 209,772 and 218,013 shares of the Company’s common stock, respectively, are outstanding under the 2016 Plan. The vesting terms range between one to three years from the grant date. The Company is amortizing to stock-based compensation expense included in General and administrative expenses the fair value of non-vested stock awards at the grant date.

As of September 30, 2021 and December 31, 2020, vested options covering 309,163 and 312,591 shares of the Company’s common stock, respectively, are outstanding with exercise prices ranging from $29.96 to $38.92 per share. In the nine months ended September 30, 2021, 16,428 stock options were exercised. In connection with the exercise, 4,974 shares of common stock were issued and 11,454 stock options were cancelled as a settlement for the liability relating to tax withholding as well as the exercise price owed to the Company.

As of September 30, 2021 there were no unvested options outstanding. As of December 31, 2020, there were 13,000 unvested options outstanding. All options expire within five years from the effective date.

Stock-based compensation expense for all stock awards and options included in General and administrative expenses:


	Three Months Ended				Nine Months Ended
	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Stock awards/Stock Option Plans	$	777,468	$	741,021	$	2,235,279	$	2,300,444

The future compensation to be recognized for all the grants for the three months ending December 31, 2021, and the years ending December 31, 2022 and 2023 will be $1.1 million, $2.6 million and $1.0 million, respectively.