Note 12 – Stock-Based Compensation and Warrants

At the 2022 Annual Meeting of Shareholders, the Company’s shareholders approved a 4,500,000 increase in the number of shares available for issuance under the 2019 Equity Plan. As of September 30, 2022, the Company had 3,758,795 shares available for issuance under the 2019 Equity Incentive Plan (“2019 Equity Plan”).

Stock-based compensation cost for the three months ended September 30, 2022 and 2021 was $1.0 million and $0.7 million, respectively, and $2.8 million and $2.8 million for the nine months ended September 30, 2022 and 2021, respectively. Stock-based compensation is included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive income. Included in stock-based compensation cost was $0.1 million and $0.2 million of stock granted to directors for the three and nine months ended September 30, 2022 and $0.2 million and $0.4 million for the three and nine months ended September 30, 2021, respectively. Such grants were awarded consistent with the Board of Director’s compensation practices. Stock-based compensation expense for the nine months ended September 30, 2022 and 2021 included $0.1 million and $0.3 million, respectively, of compensation costs for market condition-based options and RSUs.

Stock Option Activity

Stock options in the table below include both time based and market condition-based awards. Changes in stock options during the nine months ended September 30, 2022 were as follows:

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A summary of the status of the Company’s non-vested stock options as of September 30, 2022 and changes during the nine months then ended, is presented below:

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The fair value of options that vested in the nine months ended September 30, 2022 was $0.1 million. All outstanding stock options vested as of June 30, 2022.

Restricted Stock Unit Activity

The Company issues restricted stock units (“RSUs”) under the 2019 Equity Plan. RSUs in the table below include both time based and market condition-based awards. The fair value of time-based RSUs is determined based upon the closing fair market value of the Company’s common stock on the grant date.

Awards granted during the third quarter of 2022 included 500,000 RSUs with both a market condition and time element (“Barrier RSUs”). These Barrier RSUs may be earned based on achieving common stock price targets within a 48-month period and, if earned,

will vest and be settled based on a time element as outlined in the RSU agreement governing the Barrier RSUs. To value the Barrier RSUs, the Company, with the assistance of a third-party specialist, calculated the fair value of Barrier RSUs using the Monte Carlo Simulation, a risk-free rate of 3.31%, a starting common stock value of $6.95, volatility of 73%, and a standard normal distribution. The Company valued the Barrier RSUs at $3.1 million and will amortize that amount evenly over 48 months. For the three and nine months ended September 30, 2022, the Company recorded $0.1 million of stock-based compensation expense associated with these awards.

A summary of the status of RSUs and changes during the nine months ended September 30, 2022 is presented below:

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As of September 30, 2022, the Company had approximately $10.9 million of total unrecognized compensation costs related to both time based and market condition based RSUs, which will be recognized over a weighted average period of 2.9 years.

Warrants

As of September 30, 2022 and December 31, 2021, there were outstanding warrants to purchase 125,000 shares of common stock at an exercise price of $1.63.