Note 12 – Stock-Based Compensation and Warrants

As of September 30, 2023, the Company had 3,297,571 shares available for issuance under the 2019 Equity Incentive Plan (“2019 Equity Plan).

Stock-based compensation cost was $1.2 million and $1.0 million for the three months ended September 30, 2023 and 2022, respectively, and $3.8 million and $2.8 million for the nine months ended September 30, 2023 and 2022, 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 $0.4 million of stock granted to directors for the three and nine months ended September 30, 2023 compared to $0.1 million and $0.2 million for the three and nine months ended September 30, 2022, respectively. Such grants were awarded consistent with the Board of Director’s compensation practices. Stock-based compensation for the three and nine months ended September 30, 2023 included $0.2 million and $0.6 million, respectively, of compensation costs for the vesting of market condition-based restricted stock units (“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, 2023 were as follows:

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Restricted Stock Unit Activity

The Company issues restricted stock units 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.

RSU awards granted during September 2022 included 500,000 RSUs awarded to our Chief Executive Officer with both a market condition and time element (the “CEO RSUs”). The CEO RSUs may be earned based on achieving common stock price targets within a 48-month period and, if earned, the CEO RSUs 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. Stock-based compensation for the three and nine months ended September 30, 2023 included $0.2 million and $0.6 million, respectively, of compensation costs for these awards.

A summary of the status of RSUs and changes during the nine months ended September 30, 2023 is presented below:

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As of September 30, 2023, the Company had approximately $9.3 million of unrecognized compensation costs related to both time-based and market condition-based RSUs, which will be recognized over a weighted average period of 2.4 years.

Warrants

During the three months ended June 30, 2023, warrants to purchase 125,000 shares of common stock at an exercise price of $1.63 per share were exercised. There were no warrants outstanding as of September 30, 2023.