Management Incentive Plans

Upon approval of the Company's stockholders on May 30, 2019, the Company adopted the 2019 Plan. The 2019 Plan intends to: (a) encourage the profitability and growth of the Company through short-term and long-term incentives that are consistent with the Company’s objectives; (b) give participants an incentive for excellence in individual performance; (c) promote teamwork among participants; and (d) give the Company a significant advantage in attracting and retaining key employees, directors and consultants. To accomplish such purposes, the Plan provides that the Company may grant options, stock appreciation rights, restricted shares, restricted stock units, performance-based awards (including performance-based restricted shares and restricted stock units), other share based awards, other cash-based awards or any combination of the foregoing.

The Company has reserved 1,150,000 shares of its common stock for issuance under the 2019 Plan. The number of shares issued or reserved pursuant to the Plan will be adjusted by the plan administrator, as they deem appropriate and equitable, as a result of stock splits, stock dividends, and similar changes in the Company’s common stock. In connection with the grant of an award, the plan administrator may provide for the treatment of such award in the event of a change in control. All awards are made in the form of shares only.

Service-Based Awards

The Company grants service-based stock awards in the form of restricted stock units ("RSUs"). Service-based RSUs granted to executives, employees, and non-employee directors vest ratably, on an annual basis, over three years. The grant date fair value of the service-based awards was equal to the closing market price of the Company’s common stock on the date of grant.

The following table summarizes our service-based RSU activity:



	Awards		Weighted-Average Grant Date Fair Values
Unvested at January 1, 2018	176,965		$	13.25
Granted	81,574		13.37
Vested	(77,084	)	13.25
Forfeited	(8,368	)	13.32
Unvested at December 31, 2018	173,087		$	13.30
Granted	268,851		6.32
Vested	(103,381	)	12.99
Forfeited	(9,982	)	8.58
Unvested at December 31, 2019	328,575		$	7.83

Performance-Based Awards

The Company grants performance-based restricted stock units ("PRSUs") under which shares of the Company’s common stock may be earned based on the Company’s performance compared to defined metrics. The number of shares earned under a performance award may vary from zero to 150% of the target shares awarded, based upon the Company’s performance compared to the metrics. The metrics used for the grant are determined by the compensation committee of the board of directors and are based on internal measures such as the achievement of certain predetermined adjusted EBITDA, EPS growth and EBITDA margin performance goals over a 3-year period.

The Company recognizes stock-based compensation expense for these awards over the vesting period based on the projected probability of achievement of the performance conditions as of the end of each reporting period during the performance period and may periodically adjust the recognition of such expense, as necessary, in response to any changes in the Company’s forecasts with respect to the performance conditions.

In 2019 and 2018, the Company granted 6,000 and 61,307 PRSUs, respectively, to its executives and certain employees under the Plan.

For PRSUs granted on or prior to December 31, 2018, the Company has not recognized any stock-based compensation expense to-date related to these awards based on the Company’s determination that achievement of the minimum performance goal was not probable as of each reporting period.

For the PRSUs granted in 2017, the performance conditions were not met over the 3-year period ending December 31, 2019. As such, all remaining PRSUs outstanding under the aforementioned tranche of awards were forfeit as of December 31, 2019.

The following table summarizes our PRSU activity:



	Awards		Weighted-Average Grant Date Fair Values
Unvested at January 1, 2018	66,500		$	13.25
Granted	61,307		13.44
Vested	—		—
Forfeited	(3,750	)	13.25
Unvested at December 31, 2018	124,057		$	13.34
Granted	6,000		4.98
Vested	—		—
Forfeited	(67,750	)	13.27
Unvested at December 31, 2019	62,307		$	12.62

Market-Based Awards

In 2017, the Company granted 146,500 market-based restricted stock units (“MRSUs”) to its executives and certain employees. The vesting of the MRSUs is contingent upon the Company’s closing price of a share of the Company's common stock on the Nasdaq Capital market, or such other applicable principal securities exchange or quotation system, achieving at least $18.00 over a period of eighty (80) consecutive trading days during the 3-year period commencing on August 1, 2018 and concluding on July 31, 2021. Any MRSUs earned under this grant will vest upon the compensation committee’s determination and certification of the achievement of the performance goal, subject to the participant’s continuous service with the Company, except as may otherwise be provided in the participant’s employment or other services agreement with the Company. If the market condition is not met but the service condition is met, the MRSUs will not vest; however, any compensation expense we have recognized to date will not be reversed. Additionally, any compensation cost will be reversed if a participant terminates their employment prior to achievement of the performance vesting date. The Company estimated the fair value and derived service period of the MRSUs on the grant date using a Monte Carlo simulation model.

The following table summarizes our MRSU activity for the fiscal years ended December 31, 2019 and December 31, 2018:



	Awards		Weighted-Average Grant Date Fair Values
Unvested at January 1, 2018	146,500		$	6.58
Granted	—		—
Vested	—		—
Forfeited	(6,000	)	6.58
Unvested at December 31, 2018	140,500		$	6.58
Granted	—		—
Vested	—		—
Forfeited	(15,500	)	6.58
Unvested at December 31, 2019	125,000		$	6.58

The table below sets forth the assumptions used within the Monte Carlo simulation model to value the MRSU awards:



Risk-free interest rate	1.56		%
Dividend yield	0		%
Remaining performance period (years)	3.92
Expected volatility	28.54		%
Estimated grant date fair value (per share)	$	6.58
Derived service period (years)	1.96

Total recognized stock-based compensation expense amounted to $1.8 million for the year ended December 31, 2019 and $2.2 million for the year ended December 31, 2018. The aggregate fair value as of the vest date of restricted stock units that vested during the years ended December 31, 2019 and 2018 was $0.6 million and $1.0 million, respectively. Total unrecognized stock-based compensation expense related to unvested RSUs which are probable of vesting amounted to $0.9 million at December 31, 2019. These costs are expected to be recognized over a weighted average period of 1.13 years.