11.	DEFERRED COMPENSATION AWARDS

Stock-based compensation – Stock-based compensation related to option awards is measured based on the fair value of the award. The fair value of stock option awards is determined using a Black-Scholes option-pricing model. We recognize compensation expense associated with the options over the vesting period.

At September 30, 2016 and December 31, 2015, there were options to acquire 47,422 shares of common stock of GWRI outstanding, adjusting for the 100.68 to 1.00 stock split effected on April 28, 2016. The options were all vested and exercisable as of each date. The stock options have a remaining contractual life of approximately 2.00 years and have a split-adjusted exercise price of $8.65 per share.

GWRI stock option grant – In May 2016, GWRI’s Board of Directors granted stock options to acquire 325,000 shares of GWRI’s common stock to the members of the board. The options were granted with an exercise price of $7.50, the prevailing market price of the Company’s common shares at the close of business on May 20, 2016. The options vest over a two-year period, with 50% vesting on May 2017 and 50% vesting on May 2018. The options have a three-year life. The Company will expense the $2.1 million fair value of the stock option grant ratably over the two-year vesting period in accordance with ASC 323. Stock-based compensation expense of $265,000 and $383,000 was recorded for the three and nine months ended September 30, 2016, respectively. No stock-based compensation expense was recorded for the three and nine months ended September 30, 2015.

Phantom stock compensation – On December 30, 2010, we adopted a phantom stock unit plan authorizing the directors of the Company to issue phantom stock units (‘‘PSUs’’) to our employees. Following the consummation of the Reorganization Transaction, the awarded PSUs have been amended such that the outstanding units now track with the value of GWRI’s share price. The vesting of the awards has not changed. The value of the PSUs issued under the plan track to the performance of GWRI’s shares and give rise to a right of the holder to receive a cash payment the value of which, on a particular date, is the market value of the equivalent number of shares of GWRI at that date. The issuance of PSUs as a core component of employee compensation was intended to strengthen the alignment of interests between the employees of the Company and the shareholders of GWRI by linking their holdings and a portion of their compensation to the future value of the common shares of GWRI.

PSUs are accounted for as liability compensatory awards under ASC 710, Compensation – General, rather than as equity awards. PSU awards are remeasured each period and a liability is recorded equal to GRWI’s closing share price as of the balance sheet date multiplied by the number of units vested and outstanding. The value of the benefits is recorded as an expense in the Company’s financial statements over the related vesting period. Vesting occurs ratably over 12 consecutive quarters beginning in the period granted. The following table details total awards granted and the number of units outstanding as of September 30, 2016 along with the amounts paid to holders of the PSUs for the three and nine months ended September 30, 2016 and 2015 (in thousands, except unit amounts):

					Amounts Paid				Amounts Paid
					For the Three Months Ended				For the Nine Months Ended
					September 30,				September 30,
Grant Date	Units Granted		Units Outstanding		2016		2015		2016		2015
Q4 2010		350,000		—	$	—	$	—	$	—	$	1,398
Q1 2012		135,079		—		—		—		—		38
Q1 2013		76,492		—		—		32		29		83
Q1 2014		8,775		743		3		2		7		6
Q1 2015		28,828		14,414		19		14		63		26
Q1 2016		34,830		29,025		—		—		—		—
Total		634,004		44,182	$	22	$	48	$	99	$	1,551

Stock appreciation rights compensation – The Company historically accounted for SARs as liability compensatory awards under ASC 710, Compensation – General, valued using the intrinsic value method, as permitted by ASC 718 for nonpublic entities, with changes to the value of the SARs recognized as compensation expense at each quarterly reporting date. Upon becoming a public company, as defined in ASC 718, in the first quarter of 2016, the Company was required to change its methodology for valuing the SARs. While the SARs will continue to be remeasured at each quarterly reporting date, the SARs are required to be accounted for prospectively at fair value using a fair value pricing model, such as Black-Scholes. The Company recorded the impact of the change in valuation methods as a cumulative effect of a change in accounting principle, as permitted by ASC 250. The effect of the change increased the SAR liability by $103,000 which was the difference in compensation cost measured using the intrinsic value method and the fair value method. An offsetting change to accumulated deficit in the consolidated balance sheet was recorded with the revaluation, net of $38,000 in taxes. Any future changes in fair value will be recorded as compensation expense in the consolidated statement of operations.

Beginning January 2012, in an effort to reward employees for their performance, the Company adopted a stock appreciation rights plan authorizing the directors of the Company to issue SARs to our employees. The value of the SARs issued under the plan track the performance of GWRI’s shares. Each holder has the right to receive a cash payment amounting to the difference between the exercise price and the closing price of GWRI’s common shares on the exercise date, provided that the closing price is in excess of the exercise price. Holders of SARs may exercise their awards once vested. Individuals who voluntarily or involuntarily leave the Company forfeit their rights under the awards. The following table details the recipients of the awards, the grant date, units granted, exercise price, outstanding shares as of September 30, 2016 and amounts paid during the three and nine months ended September 30, 2016 and 2015 (in thousands, except share and per unit amounts):

								Amounts Paid				Amounts Paid
								For the Three Months Ended				For the Nine Months Ended
								September 30,				September 30,
Recipients	Grant Date	Units Granted		Exercise Price		Units Outstanding		2016		2015		2016		2015
Employees below senior management level ⁽¹⁾	Q1 2012		152,091	$	CAD 4.00		—	$	—	$	43	$	—	$	67
Key Executive ⁽²⁾⁽⁴⁾	Q3 2013		100,000	$	1.59		69,500		—		37		151		37
Key Executive ⁽²⁾⁽⁵⁾	Q4 2013		100,000	$	2.69		75,000		—		—		137		—
Members of Management ⁽²⁾⁽⁶⁾	Q1 2015		299,000	$	4.26		233,000		63		—		112		—
Key Executives ⁽³⁾⁽⁷⁾	Q2 2015		300,000	$	5.13		300,000		23		—		23		—
Total			951,091				677,500	$	86	$	80	$	423	$	104

(1)

The SARs vested in equal installments over four quarters and expire four years after the date of issuance.

(2)

The SARs vest ratably over sixteen quarters from the grant date.

(3)

The SARs vest over sixteen quarters, vesting 20% per year for the first three years, with the remainder (40%) vesting in year four.

(4)

The exercise price was determined by taking the weighted average share price of the five days prior to the grant date of July 1, 2013.

(5)

The exercise price was determined by taking the weighted average share price of the 30 days prior to the grant date of November 14, 2013.

(6)

The exercise price was determined to be the fair market value of one share of stock on the grant date of February 11, 2015.

(7)

The exercise price was determined to be the fair market value of one share of stock on the grant date of May 8, 2015.

As a result of the merger of GWRC into the Company and the U.S. IPO, the exercise prices for the preceding awards were translated to U.S. dollars using the prevailing noon-day Bank of Canada foreign exchange rate of US$0.7969 per CAD$1.00 as measured on May 2, 2016, the day prior to the closing of the merger. The vesting of the awards has not changed. Subsequent to the merger, each SAR will provide the holder the right to receive a cash payment amounting to the difference between the per share exercise price and the closing price of GWRI’s common shares on the exercise date, provided that the closing price is in excess of exercise price per share.

For the three months ended September 30, 2016 and 2015, the Company recorded approximately $28,000 and $50,000 of compensation expense related to the PSUs and SARs, respectively. For the nine months ended September 30, 2016 and 2015 the Company recorded approximately $1.2 million and $430,000 of compensation expense related to the PSUs and SARs, respectively. Based on GWRI’s closing share price on September 30, 2016, deferred compensation expense to be recognized over future periods is estimated for the years ending December 31 as follows (in thousands):

	PSUs		SARs
2016	$	45	$	281
2017		170		953
2018		93		687
2019		—		94
2020		—		—
Total	$	308	$	2,015