Note 9 - Stock Options and Restricted Stock

9 Months Ended

Sep. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 9 – Stock Options and Restricted Stock

Stock Options

On July 27, 2010, the Company’s Board of Directors adopted the 2010 Stock Incentive Plan (the "2010 Plan"). The aggregate number of shares of Company common stock that could be granted under the 2010 Plan was reset at the beginning of each year based on 15% of the number of shares of Company common stock then outstanding. As such, on January 1, 2016, the number of shares of Company common stock available under the 2010 Plan was reset to 381,272 shares based upon 2,541,809 shares outstanding on that date. Options were typically granted with an exercise price equal to the estimated fair value of the Company's common stock at the date of grant with a vesting schedule of one to three years and a contractual term of 5 years. As discussed below, the 2010 Plan has been replaced by a new stock option plan and no additional stock option grants will be granted under the 2010 Plan. As of September 30, 2022, there were no options available for issuance under the 2010 Plan.

On July 18, 2016, the Board of Directors unanimously approved the adoption of the Enservco Corporation 2016 Stock Incentive Plan (the "2016 Plan"), which was approved by the stockholders on September 29, 2016. The aggregate number of shares of Company common stock that may be granted under the 2016 Plan is 533,334 shares plus authorized and unissued shares from the 2010 Plan totaling 159,448, for a total reserve of 692,782 shares. As of September 30, 2022, there were no outstanding options. Further, as of September 30, 2022, we had granted 226,221 shares of restricted stock that remained outstanding under the 2016 Plan.

For the nine months ended September 30, 2022 and 2021, no options were granted or exercised. 

The following is a summary of stock option activity for all equity plans for the nine months ended September 30, 2022:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding as of December 31, 2021		1,334		$	5.55		0.42
Forfeited or expired		(1,334	)		5.55		-
Outstanding as of September 30, 2022		-		$	-		-
Vested as of September 30, 2022		-		$	-		-
Exercisable as of September 30, 2022		-		$	-		-

For the three and nine months ended September 30, 2022 and 2021, the Company recognized no stock-based compensation costs for stock options. As of September 30, 2022, there was no remaining unrecognized compensation costs related to non-vested options under the Company's stock option plans.

Restricted Stock

Restricted shares issued pursuant to restricted stock awards under the 2016 Stock Plan are restricted as to sale or disposition. These restrictions lapse periodically, generally over a period of three years. Restrictions may also lapse for early retirement and other conditions in accordance with our established policies. Upon termination of employment, shares on which restrictions have not lapsed must be returned to us, resulting in restricted stock forfeitures. The fair market value on the date of the grant of the stock with a service condition is amortized and charged to income on a straight-line basis over the requisite service period for the entire award. The fair market value on the date of the grant of the stock with a performance condition shall be accrued and recognized when it becomes probable that the performance condition will be achieved. Restricted shares that contain a market condition are amortized and charged over the life of the award.

A summary of the restricted stock activity is presented below:

	Shares			Weighted Average Grant Date Fair Value
Restricted shares as of December 31, 2021		181,221		$	1.58
Granted		345,000			2.68
Vested		(178,721	)		2.12
Forfeited		(80,000	)		2.21
Restricted shares as of September 30, 2022		267,500		$	2.44

For the three and nine months ended September 30 2022, the Company recognized stock-based compensation costs for restricted stock of approximately $159,000 and $655,000, respectively, in "Sales, general, and administrative expenses" in the condensed consolidated statements of operations. For the three and nine months ended September 30, 2021, the Company recognized stock-based compensation costs for restricted stock of approximately $21,000 and $70,000, respectively, in "Sales, general, and administrative expenses" in the condensed consolidated statements of operations. Compensation cost is revised if subsequent information indicates that the actual number of restricted stock vested due to service is likely to differ from previous estimates.

As of September 30, 2022, there is approximately $323,000 of unamortized stock-based compensation expense for restricted stock to be amortized over the next 1.25 years.

The following table sets forth the weighted average outstanding of potentially dilutive instruments for the three and nine months ended September 30, 2022 and 2021: 

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Stock options		-		2,934		747		4,201
Warrants		1,192,085		1,192,085		1,192,085		1,170,204
Weighted average		1,192,085		1,195,019		1,192,832		1,174,405

The Company awarded 70,340 restricted shares for the 2022 Board of Directors fees and recognized expense of approximately $60,000 related to the award of these shares for the nine months ended September 30, 2022.

The Company issued 50,000 restricted shares for the nine months ended September 30, 2022 as part of the severance agreement related to the resignation of a former Chief Financial Officer. This issuance had a grant date fair value of approximately $112,000 and the expense for this issuance was recognized within the line item "Severance and transition costs" in the condensed consolidated statement of operations for the nine months ended September 30, 2022. Unvested restricted performance share-based awards totaling 61,000 shares were forfeited as part of the severance agreement.  

The Company granted Mark Patterson, the Company's Chief Financial Officer, a 300,000 share restricted stock award for the nine months ended September 30, 2022 that is subject to transfer and forfeiture restrictions. The vesting of 100,000 of the restricted shares from this award occurred simultaneous with the grant date; however, the transfer and forfeiture restrictions on the remaining 200,000 restricted shares will lapse in two equal installments of 100,000 restricted shares on each of January 1, 2023 and January 1, 2024, subject to his continuous service through each vesting date. This restricted stock award is not being granted under the Company’s 2016 Equity Incentive Plan. Additionally for the nine months ended September 30, 2022, the Company granted Mr. Patterson a 45,000 share restricted stock award that is also subject to transfer and forfeiture restrictions. The vesting of 15,000 of the restricted shares from this award occurred simultaneous with the grant date; however, the transfer and forfeiture restrictions on the remaining 30,000 restricted shares will lapse in two equal installments of 15,000 restricted shares on each of January 1, 2023 and January 1, 2024, subject to his continuous service through each vesting date. This restricted stock award is being granted under the Company’s 2016 Equity Incentive Plan. The vesting of all such shares of restricted stock for Mr. Patterson would accelerate upon any termination or constructive termination of his employment with the Company without cause that occurs within one year of a change of control of the Company.