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EQUITY AND LONG-TERM COMPENSATION
6 Months Ended
Jun. 30, 2023
Share-Based Payment Arrangement [Abstract]  
EQUITY AND LONG-TERM COMPENSATION

8 – EQUITY AND LONG-TERM COMPENSATION

 

Summary of Stock Based Compensation Activity

 

Power REIT’s 2020 Equity Incentive Plan (the “Plan”), which superseded the 2012 Equity Incentive Plan, was adopted by the Board on May 27, 2020 and approved by shareholders on June 24, 2020. It provides for the grant of the following awards: (i) Incentive Stock Options; (ii) Nonstatutory Stock Options; (iii) SARs; (iv) Restricted Stock Awards; (v) RSU Awards; (vi) Performance Awards; and (vii) Other Awards. The Plan’s purpose is to secure and retain the services of Employees, Directors and Consultants, to provide incentives for such persons to exert maximum efforts for the success of the Trust and to provide a means by which such persons may be given an opportunity to benefit from increases in value of the common stock through the granting of awards. As of June 30, 2023, the aggregate number of shares of common stock that may be issued pursuant to outstanding awards is currently 150,917 which is subject to adjustment per the Plan.

 

Summary of Stock Based Compensation Activity – Options

 

On July 15, 2022, the Trust granted non-qualified stock options (“options”) to acquire 205,000 shares of common stock at a price of $13.44 to its independent trustees, officers and an employee. The term of each option is 10 years. The options vest over three years as follows: in a series of thirty-six (36) equal monthly installments measured from the Vesting Commencement Date on the same date of the month as the Vesting Commencement Date which is August 1, 2022.

 

 

The Trust accounts for share-based payments using the fair value method. The Trust recognizes all share-based payments in its financial statements based on their grant date fair values and market closing price, calculated using the Black-Scholes option valuation model.

 

The following assumptions were made to estimate fair value:

 

Expected Volatility   63%
Expected Dividend Yield   0%
Expected Term (in years)   5.8 
Risk Free Rate   3.05%
Estimate of Forfeiture Rate   0%

 

The Trust uses historical data to estimate dividend yield and volatility and the “simplified method” as described in the SEC Staff Accounting Bulletin #110 to determine the expected term of the option grants. The risk-free interest rate for the expected term of the options is based on the U.S. treasury yield curve on the grant date. The Trust does not have historical data of forfeiture and used a 0% forfeiture rate in calculating unrecognized share-based compensation expense and will account for forfeitures as they occur. On January 31, 2023, 6,250 options and on April 30, 2023, 1,250 options were forfeited by an employee who is no longer employed by the Trust.

 

The summary of stock-based compensation activity for the six months ended June 30, 2023, with respect to the Trust’s stock options, is as follows:

 

Summary of Activity - Options

 

  

Number of


Options

  

Weighted


Average


Exercise Price

  

Aggregate


Intrinsic Value

 
Balance as of December 31, 2022   205,000   $13.44          - 
 Options Forfeited   (7,500)   13.44      
Balance as of June 30, 2023   197,500    13.44    - 
                
Options exercisable as of June 30, 2023   60,347   $13.44    - 

 

The weighted average remaining term of the options is 9.04 years.

 

Summary of Stock Based Compensation Activity – Restricted Stock

 

On July 15, 2022, the Trust granted 22,400 shares of restricted stock to its officer (20,000 shares) and independent trustees (600 shares each). The restricted stock vests over 36 months for the officer and quarterly over four quarters for the trustees and is valued based on the market price of the common stock on the grant date.

 

 

The summary of stock-based compensation activity for the six months ended June 30, 2023, with respect to the Trust’s restricted stock, was as follows:

 

Summary of Activity - Restricted Stock

 

  

Number of
Shares of
Restricted
Stock

  

Weighted
Average
Grant Date
Fair Value

 
Balance as of December 31, 2022   28,182    21.64 
Plan Awards   -    - 
Restricted Stock Forfeited   -    - 
Restricted Stock Vested   (8,017)   23.65 
Balance as of June 30, 2023   20,165    20.83 

 

Stock-based Compensation

 

During the six months ended June 30, 2023, the Trust recorded approximately $190,000 of non-cash expense related to restricted stock and approximately $263,000 of non-cash expense related to options granted compared to approximately $218,000 of non-cash expense related to restricted stock for the six months ended June 30, 2022. As of June 30, 2023, there was approximately $420,000 of total unrecognized share-based compensation expense for restricted stock and approximately $1,088,000 of total unrecognized share-based expense for options, which expense will be recognized through the third quarter of 2025. The Trust does not currently have a policy regarding the repurchase of shares on the open market related to equity awards and does not currently intend to acquire shares on the open market.

 

Preferred Stock Dividends

 

During the six months ended June 30, 2023, the Trust accrued a total of approximately $326,000 of dividends to holders of Power REIT’s Series A Preferred Stock.