Note 10. Stock-Based Compensation

Restricted Stock Units

In February 2017, the Company granted awards of restricted stock units (“RSUs”) covering 612,000 shares to certain of its employees. In August 2017, 100,000 additional units were issued to the Company’s chairman of the board of directors, and in October 2017, 28,409 additional units were issued to the Company’s internal general counsel. The awards vest over a three-year period as follows: 40% on the first anniversary of issuance and 30% on each of the second and third anniversaries of issuance, such that the RSU’s will be fully vested on the third anniversary of issuance. The Company determined the fair value of granted RSUs based on the market price of the Class A voting common stock of the Company on the date of grant. RSUs are paid in Class A voting common stock or cash, at the Company’s option, after the vesting of the applicable RSU. Compensation expense for granted RSUs is recognized over the vesting period.

In February 2018, the Company elected to offer cash settlement to all employees for vested RSUs and, as a result of this modification, the RSU awards are classified as a liability on the Company’s balance sheet in accordance with ASC 718, Compensation – Stock Compensation, as of March 31, 2018. As of the date of the modification, periodic compensation expense related to the awards is recognized based on the fair value of the awards, subject to a floor valuation that represents the compensation expense amount that would have otherwise been recognized had the Company not modified the terms of the award. The modification of the RSU awards did not result in any incremental costs to the Company for the three months ended March 31, 2018. The liability for RSUs on the Unaudited Condensed Consolidated Balance Sheet as of March 31, 2018 was $107 thousand.

The following table presents RSUs activity during the three months ended March 31, 2018:

	Shares			Weighted Average Remaining Contractual Term (in years)
Non-vested RSUs at December 31, 2017		728,909			2.2
Granted		—			—
Vested		(280,200	)		—
Forfeited		—			—
Non-vested RSUs at March 31, 2018		448,709			1.9

Stock Appreciation Rights

In February 2017, the Company granted awards of stock appreciation rights (“SARs”) covering 700,000 shares to certain of its employees and its non-employee directors. The awards vest over a three-year period as follows: 40% on the first anniversary of issuance and 30% on each of the second and third anniversaries of issuance, such that the SAR’s will be fully vested on the third anniversary of issuance. The SARs will expire five-years after the date of issuance. The exercise price of the SAR is the fair market value of the Company’s Class A voting common stock on the date of the grant. The SAR entitles the holder to receive from the Company, upon exercise of the exercisable portion of the SAR, an amount determined by multiplying the excess of the fair market value of one share on the date of exercise over the exercise price per share by the number of shares with respect to which the SAR is exercised. SARs will be paid in cash or common stock at holder’s election once the SAR is vested, with the provision that the Company possesses sufficient liquidity to allow for cash settlement of the SAR. The SARs are accounted for as a liability on the Unaudited Condensed Consolidated Balance Sheets, which was approximately $442 thousand as of March 31, 2018.

The following table presents SARs activity during the three months ended March 31, 2018:

	Shares		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)
Outstanding at December 31, 2017		690,000	$	7.20		4.3
SARs vested and exercisable at December 31, 2017		—		—		—
Granted		—		—		—
Exercised		—		—		—
Expired/forfeited		—		—		—
Outstanding at March 31, 2018		690,000	$	7.20		3.9
SARs vested and exercisable at March 31, 2018		276,000	$	7.20		3.9

Stock-Based Compensation Expense

For the three months ended March 31, 2018 and 2017, the Company recorded stock-based compensation expenses of approximately $450 thousand and $178 thousand, respectively, related to RSUs and SARs. As of March 31, 2018, the total unrecognized stock-based compensation cost to be recognized over the next two years is approximately $3.0 million.