Note 10 - Stock-based Compensation

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE 10. STOCK-BASED COMPENSATION

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

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. As of September 30, 2022, there was no unrecognized compensation expense associated with stock options, $2.4 million was associated with restricted stock and restricted stock units, and $3.2 million with phantom stock units. The unrecognized compensation expense associated with restricted and phantom stock units is expected to be recognized over a 1.4 and 2.0 year weighted average period, respectively.

Stock Options

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 and other stock awards that contain a market condition related to the return on investment that the Company’s stockholders achieve or obtaining a certain stock price, the awards are valued using a lattice-based 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 risk-free rate is based on the U.S. Treasury yield curve for a term equivalent to the estimated time to liquidity. There were no options granted during the three and nine months ended September 30, 2022.

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% or 25% on each of the first five or 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 of 2018 for all Performance Options that have been granted and there are currently 493,104 Performance Options exercisable and outstanding.

A summary of the changes in stock options outstanding during the nine months ended September 30, 2022, 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, 2021		1,244,073		$	9.14		3.4	$	193
Granted		-		$	-		-	$	-
Exercised		-		$	-		-	$	-
Canceled or forfeited		(81,985	)	$	10.51		-	$	-
Options outstanding as of September 30, 2022		1,162,088		$	9.05		2.6	$	-
Options exercisable as of September 30, 2022		1,162,088		$	9.05		2.6	$	-

Restricted Stock and Restricted Stock Units

Restricted stock awards and restricted stock units 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 12 months following a change in control or as a result of death or disability, any such unvested time-based awards shall become vested.

Certain restricted stock units are eligible to vest upon the satisfaction of certain performance conditions. Vesting occurs on the first day that the average price per share of our common stock for the prior 60 consecutive trading days exceeds certain stock prices, subject to continued employment with the Company or its subsidiaries. The performance-based restricted stock units will be forfeited if the performance target is not achieved within four years of the grant date. 

A summary of the changes in restricted stock and restricted stock units outstanding during the nine months ended September 30, 2022, is as follows:

	Shares Outstanding			Weighted Average Grant Date Fair Value (per share)
Restricted Stock and Restricted Stock Units Outstanding as of December 31, 2021		1,934,876		$	8.25
Granted		240,658		$	5.99
Vested		(435,746	)	$	10.70
Canceled or forfeited		(40,617	)	$	9.14
Restricted Stock and Restricted Stock Units Outstanding as of September 30, 2022		1,699,171		$	7.23

Phantom Stock Units

Phantom 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 12 months following a change in control or as a result of death or disability, any such unvested awards shall become vested. Vesting tranches of the phantom stock awards can be settled in cash or stock at the Company’s discretion. The phantom stock awards that the Company intends to settle in cash are accounted for as liability awards and are re-measured at fair value each reporting period until they become vested with compensation expense being recognized over the requisite service period. The liability associated with such awards is included in “Accrued Liabilities” within the unaudited Condensed Consolidated Balance Sheets. All other stock-based awards are classified as equity. 

Certain phantom stock units are eligible to vest upon the satisfaction of certain performance conditions. Vesting occurs on the first day that the average price per share of our common stock for the prior 60 consecutive trading days exceeds certain stock prices and only if the performance date occurs prior to the fourth anniversary of the date of the grant; provided. However, if the performance date occurs prior to the first anniversary of the date of grant, vesting will occur on the first anniversary of the date of grant, subject to continued employment with the Company or its subsidiaries.

A summary of the changes in phantom stock outstanding during the nine months ended September 30, 2022 is as follows:

	Shares Outstanding			Weighted Average Grant Date Fair Value (per share)
Phantom Stock Outstanding as of December 31, 2021		2,253,400		$	6.47
Granted		2,669		$	7.87
Vested		(404,460	)	$	6.24
Canceled or forfeited		(73,739	)	$	6.28
Phantom stock outstanding as of September 30, 2022		1,777,870		$	6.54