STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2020

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 13 – STOCK-BASED COMPENSATION

Under the 2017 Omnibus Incentive Plan (the Plan), the Company may grant awards of stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and performance awards. Under the Plan, the Company is authorized to issue up to 4.5 million shares of common stock. As of December 31, 2020, the Company has no common stock reserved for future issuances of stock options and restricted stock units under the Company’s 2017 Omnibus Incentive Plan. As of December 31, 2020, the Company had 994,100 of performance stock units (“PSUs”) classified as a liability due to the lack of shares available to be issued and can ultimately be cash-settled through the grant of cash-settled restricted stock units or stock appreciation rights if there is not a sufficient number of shares available. Equity awards generally vest annually on a pro-rata basis over a three to five-year period on the anniversary of each grant date. The Company also grants awards to our directors under the Plan. The awards granted to directors vest ratably over periods of one to five years annually on the anniversary of each grant date.

Aggregate stock-based compensation charges, net of forfeitures, were $5.9 million, $3.8 million and $3.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. These expenses are included as a component of salaries, wages and employee benefits on the accompanying consolidated statements of operations and comprehensive income (loss).

Stock-based compensation cost with equity classification is measured at the grant date, based on the estimated fair value of the award, and is recognized on a straight-line basis as expense over the employees’ requisite service period. Forfeitures are recorded as a cumulative adjustment to stock-based compensation expense in the period forfeitures occur. As of December 31, 2020, there was $5.2 million, $2.4 million, and $1.6 million of unrecognized stock-based compensation expense related to stock options, restricted stock units and PSUs, respectively. This expense will be recognized over the weighted average periods of 2.1 years for stock options, 1.5 years for restricted stock units and 2.1 years for PSUs.

Stock-based compensation cost with liability classification is recognized on a straight-line basis over the vesting period and revalued on each balance sheet date with the corresponding adjustment to stock-based compensation recorded in the consolidated statements of operations and comprehensive income (loss). As of December 31, 2020, the total fair value of the liability-classified PSU’s was $5.5 million. As of December 31, 2020, share-based payment liability was $1.1 million for liability-classified PSUs.

Stock Options

The following table summarizes stock option grants:

Grantee Type	# of Options Granted	Issued and Outstanding	Vesting Period	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value (Per Option)
Director Group	150,000	100,000	5 years	$	9.98	$	4.36
Employee Group	4,662,630	3,014,931	3-5 years	$	5.60	$	3.08
Total		3,114,931

The Company’s calculations of the fair value of stock options granted as equity classification during the years ended December 31, 2020, 2019 and 2018 were made using the Black-Scholes option-pricing model. The fair value of the Company’s stock option grants were estimated utilizing the following assumptions for the years ended December 31:

	2020	2019	2018
Weighted average expected life	6.0 years	6.3 years	6.5 years
Risk-free interest rates	0.39% to 0.47%	1.45% to 2.58%	2.28% to 3.00%
Expected volatility	41.0% to 42.5%	32.5% to 37.9%	36.7% to 39.9%
Expected dividend yield	0.00%	0.00%	0.00%

Since the Company does not have a sufficient history of exercise behavior, expected term is calculated using the assumption that the options will be exercised ratably from the date of vesting to the end of the contractual term for each vesting tranche of awards. The risk-free interest rate is based on the U.S. Treasury yield curve for the period of the expected term of the stock option. Expected volatility is calculated using an index of publicly traded peer companies.

A summary of option activity as of December 31, 2020 and  2019 and changes during the years then ended are as follows:

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)	Aggregate Intrinsic Value (in millions)
Outstanding as of January 1, 2019	2,066,529	$	10.23	8.5	$	—
Granted	631,136		3.20
Forfeited or expired	(388,741)		9.73
Outstanding as of December 31, 2019	2,308,924		8.39	8.0		0.2
Granted	2,029,900		1.75
Forfeited or expired	(1,223,893)		2.96
Outstanding as of December 31, 2020	3,114,931	$	6.19	7.9	$	5.9
Exercisable as of December 31, 2020	1,139,811		9.26	6.7		0.4
Vested and expected to vest as of December 31, 2020	3,114,931	$	6.19	7.9	$	5.9

The stock options’ maximum contract term is ten years. The total weighted average fair value of options granted during the years ended December 31, 2020 and 2019 was $4.6 million and $0.8 million, respectively.

Restricted Stock Units

Restricted stock units are nontransferable until vested and the holders are entitled to receive dividends with respect to the non-vested units. Prior to vesting, the grantees of restricted stock units are not entitled to vote the shares. Restricted stock unit awards vest in equal annual increments over the vesting period.

The following table summarizes restricted stock unit grants under the Plan:

Grantee Type	# of Restricted Stock Units Granted	Issued and Outstanding	Vesting Period	Weighted Average Grant Date Fair Value (Per Unit)
Director Group	893,996	340,415	1-2 years	$	2.75
Employee Group	1,568,655	254,386	5 years	$	10.59
Total		594,801

A summary of restricted stock unit awards activity under the Plan as of December 31, 2020 and 2019 and changes during the years then ended are as follows:

	Units	Weighted Average Grant Date Fair Value (Per Unit)
Non-vested as of January 1, 2019	841,361	$	10.44
Granted	753,986		2.45
Vested	(187,956)		10.35
Forfeited	(226,509)		10.16
Non-vested as of December 31, 2019	1,180,882		5.44
Granted	108,498		2.77
Vested	(600,900)		4.05
Forfeited	(93,679)		9.42
Non-vested as of December 31, 2020	594,801	$	5.72

Performance Stock Units

PSUs become eligible for vesting upon the achievement of specific market-based conditions based on the performance of per share price of the Company’s common stock and subject to final vesting based on the participant’s continued employment through the end of the requisite service periods. The grant date fair value of PSUs was determined using a Monte Carlo probability model and compensation cost is recognized ratably over the requisite service period with a corresponding liability. The liability is remeasured on each balance sheet date with corresponding adjustment to stock-based compensation recorded in the consolidated statements of operations and comprehensive income (loss).

As of December 31, 2020, the Company had 994,100 PSUs classified as a liability and 722,000 PSU’s classified as equity.  The fair value of the liability-classified awards is remeasured at each period end using a Monte Carlo probability model, and the equity-classified awards are based on the grant date fair value using a Monte Carlo probability model.

The following inputs and assumptions were used to calculate the fair value of the PSUs:

	As of December 31, 2020
	Liability-classified	Equity-classified
Term	2.3 to 2.6 years	1.9 to 3.0 years
Risk-free interest rate	0.14% to 0.15%	0.13% to 0.21%
Expected volatility	92.3% to 96.5%	86.1% to 102.2%
Expected dividend yield	0.00%	0.00%

A summary of performance stock unit awards activity as of December 31, 2020 and changes during the year ended are as follows:

	Units	Weighted Average Grant Date Fair Value (Per Unit)
Non-vested as of January 1, 2020	—	$	—
Granted	2,471,500		1.14
Vested	—		—
Forfeited	(755,400)		0.59
Non-vested as of December 31, 2020	1,716,100	$	1.38