NOTE

11.

STOCK-BASED COMPENSATION

Stock Options

The Company has granted stock awards to eligible participants under its incentive plans. The stock awards include options to purchase the Company’s common stock. These stock options include a combination of service and market conditions, as further described below.

For the

three

months ended

March 31, 2020

, the Company recognized

$0.1

million in stock-based compensation for stock options and

$1.4

million for restricted stock awards. For the

three

months ended

March 31, 2019

, the Company recognized

$0.2

million in stock-based compensation for stock options and

$0.9

million for restricted stock awards. We recognize stock-based compensation on a straight-line basis over the vesting period for time based awards and we recognize the expense for awards with market conditions over the service period derived from the related valuation.

The amount of unrecognized compensation expense associated with stock options was

$0.7

million and for restricted stock was

$10.3

million at

March 31, 2020

which is expected to be recognized over a

1.8

and

2.6

yearly weighted average period, respectively.

The Company calculates the grant date fair value of stock options that vest over a service period using the Black Scholes model. For stock options that contain a market condition related to the return on investment that the Company’s stockholders achieve, the options are valued using a lattice-based option valuation model. The assumptions used in these calculations are the expected dividend yield, expected volatility, risk-free interest rate and expected term (in years). Expected volatilities are based on implied volatilities from comparable companies. The expected time to liquidity is based on Management’s estimate. The risk-free rate is based on the U.S. Treasury yield curve for a term equivalent to the estimated time to liquidity. There were

options granted during the

three

months ended

March 31, 2020

Stock option awards represent options to purchase common stock and are granted pursuant to the Company’s incentive plans, and include options that the Company primarily classifies as Tranche A or time based, Tranche B and Tranche C.

Tranche A or time based options are eligible to vest in equal installments of

20%

25%

on each of the

first

five

four

anniversaries of the date of the grant, subject to continued employment with the Company or its subsidiaries. In the event of a termination of employment without cause or as a result of death or disability, any such time based options which would have vested on the next applicable vesting date shall become vested, and the remaining unvested time based options shall be forfeited. In addition, upon a Change in Control (as defined in the incentive plans), subject to continued employment through the date of the Change in Control, all outstanding unvested time based options shall immediately vest. An IPO does

not

qualify as a Change in Control as it relates to the vesting of stock options.

All other option awards are eligible to vest upon the satisfaction of certain performance conditions (collectively, “Performance Options”). These performance conditions included the achievement of investor returns or common stock trading prices. These performance conditions were achieved in

October

2018

for all Performance Options that have been granted and there are currently

595,621

Performance Options exercisable and outstanding.

A summary of the changes in stock options outstanding during the

three

months ended

March 31, 2020

, is as follows:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contract Term (years)		Aggregate Intrinsic Value (in thousands)
Options outstanding as of December 31, 2019		1,382,986		$	9.10		5.45	$	4,793
Granted		-			-		-		-
Exercised		(15,544	)	$	10.15
Canceled or forfeited		(4,274	)	$	10.15
Options outstanding as of March 31, 2020		1,363,168		$	9.08		5.04	$	-
Options exercisable as of March 31, 2020		1,233,857		$	8.54		4.80	$	-

Restricted Stock

Restricted stock awards are typically eligible to vest in equal installments of

25%

on each of the

first

four

anniversaries of the date of the grant, subject to continued employment with the Company or its subsidiaries. In the event of a termination of employment without cause upon or within

months following a change in control or as a result of death or disability, any such unvested time based restricted stock awards shall become vested.

Certain restricted stock awards are eligible to vest upon the satisfaction of certain conditions (collectively, “Performance Awards”). Vesting occurs on the

first

day that the average price per share of our common stock for the prior

consecutive trading days exceeds certain stock prices.

A summary of the changes in restricted stock outstanding during the

three

months ended

March 31, 2020

, is as follows:

	Shares Outstanding			Grant Date Fair Value (per share)
Restricted Stock Outstanding as of December 31, 2019		712,496		$	23.66
Granted		38,941		$	10.45
Vested		(75,565	)	$	23.84
Canceled or forfeited		(23,199	)	$	24.74
Restricted stock outstanding as of March 31, 2020		652,673		$	22.82