Note 12 – Employee Benefit Plans

Defined Contribution Retirement Plan

The Company sponsors a qualified defined contribution retirement plan (the “401(k) Plan”) covering all eligible employees, as defined in the 401(k) Plan. The 401(k) Plan allows participating employees to defer the receipt of a portion of their compensation, on a pre-tax or post-tax basis, and contribute such amount to one or more investment options. Employer contributions to the plan are at the discretion of the Company. The Company did not accrue or make any employer contributions in 2022 and 2021.

Equity Incentive Plan

The Company provides equity-based compensation to directors, officers, key employees and other key individuals performing services for the Company under its 2019 Equity Incentive Plan (the “Equity Incentive Plan”). The Equity

Incentive Plan provides for the granting of stock options, warrants, restricted stock or other stock-based awards. All awards are required to be approved by the Board or a designated committee of the Board. Options are generally granted with an exercise price equal to fair market value of the Company’s common stock on the date of grant and expire after ten years. Vesting of options and restricted stock can either be based on the passage of time or on the achievement of performance goals. The Board has the authority to amend, modify or terminate the Equity Incentive Plan, subject to any required approval by the Company’s stockholders under applicable law or upon advice of counsel. No such action would affect any options previously granted under the Equity Incentive Plan without the consent of the holders.

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Effective May 18, 2022, the Board and the Company’s stockholders approved a 4,500,000 increase to the number of shares of common stock authorized for issuance under the Equity Incentive Plan, bringing the maximum aggregate limit to 11,573,922 shares. As of December 31, 2022, the Company had 3,727,848 shares available for issuance under the Equity Incentive Plan.

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Stock-based compensation cost for 2022 and 2021 was $4.0 million and $3.6 million, respectively, and is included in general and administrative expenses in the consolidated statements of operations and comprehensive income. Included in stock-based compensation cost was $0.3 million and $0.5 million of unrestricted stock granted to directors for the years ended December 31, 2022 and 2021, respectively. Such grants were awarded consistent with the Board’s compensation practices and included grants to two new board members appointed in September 2021. Stock-based compensation for the year ended December 31, 2022 included $0.2 million of compensation costs for market condition-based restricted stock units (“RSU”). Refer to discussion of CEO RSUs below. In addition, stock-based compensation expense for the year ended December 31, 2021 included $0.4 million of employer payroll taxes associated with stock option and restricted RSU activity and $0.3 million of compensation costs for the vesting of market condition-based stock options and RSUs.

Stock Option Activity

Changes in outstanding stock options during the years ended December 31, 2022 and 2021 were as follows:

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There were no stock options granted in 2022 or 2021.

A summary of the status of the Company’s non-vested stock options as of December 31, 2022 and 2021 and changes during the years then ended, is presented below:

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The fair value of options that vested in each of the years ended December 31, 2022 and 2021 was $0.1 million.

Restricted Stock Unit Activity

The Company issues restricted stock units under the 2019 Equity Plan. The fair value of RSUs is determined based upon the closing fair market value of the Company’s common stock on the grant date, except for the RSUs discussed below.

Awards granted during September 2022 included 500,000 RSUs awarded to our Chief Executive Officer with both a market condition and time element (“CEO RSUs”). The CEO 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 CEO RSUs. To value the CEO RSUs, the Company, with the assistance of a third-party specialist, calculated the fair value of CEO 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 CEO RSUs at $2.9 million and will amortize this amount evenly over 48 months. For 2022, the Company recorded $0.2 million of stock-based compensation expense associated with these awards.

A summary of the status of RSUs and changes during the years ended December 31, 2022 and 2021 is presented below:

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As of December 31, 2022, the Company had approximately $9.8 million of total unrecognized compensation costs related to restricted stock awards, which will be recognized over a weighted average period of 2.8 years.