In March of 2021, stockholders approved the PHX Minerals Inc. 2021 Long-Term Incentive Plan (the “LTIP”). The LTIP expressly prohibits the payment of dividends or dividend equivalents on any award before the date on which the award vests. Awards under the LTIP will be subject to any clawback or recapture policy that the Company may adopt from time to time or any clawback or recapture provisions set forth in an award agreement.

The fair value of the restricted stock (time-based) was based on the closing price of the shares on their award date and will be recognized as compensation expense ratably over the vesting period. The fair value of the performance shares (market-based) was estimated on the grant date using a Monte Carlo valuation model that factors in information, including the expected price volatility, risk-free interest rate and the probable outcome of the market condition, over the expected life of the performance shares. Vesting of these performance shares is based on the performance of the market price of the Common Stock over the vesting period. Compensation expense for the performance shares is a fixed amount determined at the grant date and is recognized over the vesting period regardless of whether performance shares are awarded at the end of the vesting period. Upon vesting, shares are expected to be issued out of shares held in treasury or the Company’s authorized but unissued shares. Compensation expense for the restricted stock awards is recognized in G&A. Forfeitures of awards are recognized when they occur.

On March 2, 2022, the Company awarded shares of Common Stock in the form of time-based and market-based restricted stock to the directors, employees and officers of the Company. Non-employee directors received 138,249 time-based shares with a fair value on the award date of $387,095. These shares vest in December 2022. Officers were awarded 402,086 market-based shares with a fair value on their award date of $1,679,757. Upon vesting, the market-based shares that do not meet certain performance criteria are forfeited. Both employees and certain officers were also awarded 126,013 time-based shares with a fair value on the award date of $352,838. The shares issued to employees time-vest ratably over a three-year period ending in December 2024, and the shares awarded to the officers cliff vest at the end of a three-year period ending in December 2024. All shares awarded on March 2, 2022, have voting rights during the vesting period and do not include the right to dividends prior to vesting.

On April 1, 2022, the Company awarded shares of common stock in the form of time-based restricted stock to a new director. The non-employee director received 20,737 time-based shares with a fair value on the award date of $62,004. These shares vest in December of 2022, contain voting rights during the vesting period, and do not include the right to dividends prior to vesting.

On January 31, 2023, the Company granted shares of Common Stock in the form of time-based and market-based restricted stock to the employees and officers of the Company. Officers were awarded 299,900 market-based shares with a fair value on their award date of $1,541,893. Upon vesting, the market-based shares that do not meet certain performance criteria are forfeited. Both employees and certain officers were also awarded 97,053 time-based shares with a fair value on the award date of $350,362. The shares issued to employees time-vest ratably over a three-year period ending in December of 2025, and the shares awarded to the officers cliff vest at the end of a three-year period ending in December of 2025. All shares granted on January 31, 2023 have voting rights during the vesting period.

On April 20, 2023, the Company granted 92,544 shares of Common Stock in the form of time-based restricted stock to the non-employee directors of the Company, which had a fair value of $243,390. The shares of restricted stock fully vest in December 2023 and have voting rights during the vesting period.

On December 21, 2023, the Company granted 482,339 shares of Common Stock in the form of time-based and market-based restricted stock to the employees and officers of the Company. Officers were awarded 369,114 market-based shares with a fair value on their award date of $1,678,599. Upon vesting, the market-based shares that do not meet certain performance criteria are forfeited. Both employees and certain officers were also awarded 113,225 time-based shares with a fair value on the award date of $381,571. The shares issued to employees time-vest ratably over a three-year period ending in December of 2026, and the shares awarded to the officers cliff vest at the end of a three-year period ending in December of 2026. All shares granted on December 21, 2023 have voting rights during the vesting period.

On December 21, 2023, the Company granted 116,904 shares of Common Stock in the form of time-based restricted stock to the non-employee directors of the Company, which had a fair value of $393,967. The shares of restricted stock fully vest in December 2024 and have voting rights during the vesting period.

The following table summarizes the Company’s pre-tax compensation expense for the year ended December 31, 2023, three months ended December 31, 2022, and year ended September 30, 2022, related to the Company’s market-based, time-based and performance-based restricted stock:


	Year Ended		Three Months Ended		Year Ended
	December 31, 2023		December 31, 2022		September 30, 2022
Market-based, restricted stock	$	1,722,814	$	311,548	$	1,018,136
Time-based, restricted stock		483,096		206,333		730,303
Performance-based, restricted stock		-		6,376		463,234
Total compensation expense	$	2,205,910	$	524,257	$	2,211,673

Upon vesting, shares are expected to be issued out of shares held in treasury or authorized but unissued shares.

A summary of the status of, and changes in, unvested shares of restricted stock awards is presented below:


	Market-Based Unvested Restricted Awards			Weighted Average Grant-Date Fair Value		Time-Based Unvested Restricted Awards			Weighted Average Grant-Date Fair Value		Performance-Based Unvested Restricted Awards			Weighted Average Grant-Date Fair Value
Unvested shares as of September 30, 2021		356,149		$	3.56		203,100		$	5.33		34,814		$	8.99

Granted		402,086			4.18		284,999			2.81		-			-
Vested		-			-		(127,386	)		3.41		-			-
Forfeited		(17,585	)		8.16		(6,855	)		6.92		-			-
Unvested shares as of September 30, 2022		740,650		$	3.79		353,858		$	3.97		34,814		$	8.99

Granted		-			-		-			-		17,408			8.99
Vested		-			-		(200,634	)		3.11		(52,222	)		8.99
Forfeited		(34,815	)		8.58		-			-		-			-
Unvested shares as of December 31, 2022		705,835		$	3.55		153,224		$	5.09		-		$	-

Granted		669,014			4.81		419,726			3.26		-			-
Vested		(303,750	)		2.72		(147,495	)		5.17		-			-
Forfeited		-			-		(7,919	)		3.41		-			-
Unvested shares as of December 31, 2023		1,071,099			4.57		417,536			3.26		-			-

The fair value of the vested shares for the year ended December 31, 2023 and three months ended December 31, 2022 was $1,539,424 and $948,358, respectively.