Stock-based and Other Compensation

3 Months Ended

Mar. 31, 2022

Share-Based Payment Arrangement [Abstract]

Stock-based and Other Compensation

Note 11 – Stock-based and Other Compensation

In December 2015, Lifeway stockholders approved the 2015 Omnibus Incentive Plan, which authorized the issuance of an aggregate of 3.5 million shares to satisfy awards of stock options, stock appreciation rights, unrestricted stock, restricted stock, restricted stock units, performance shares and performance units to qualifying employees. Under the Plan, the Board or its Audit and Corporate Governance Committee approves stock awards to executive officers and certain senior executives, generally in the form of restricted stock or performance shares. The number of performance shares that participants may earn depends on the extent to which the corresponding performance goals have been achieved. Stock awards generally vest over a three-year performance or service period. At March 31, 2022, 3.281 million shares remain available under the Omnibus Incentive Plan. While the Company plans to continue to issue awards pursuant to the Plan at least annually, it may choose to suspend the issuance of new awards in the future and may grant additional awards at any time including issuing special grants of restricted stock, restricted stock units, and stock options to attract and retain new and existing executives.

Stock Options

The following table summarizes stock option activity during the three months ended March 31, 2022:

	Options		Weighted average exercise price		Weighted average remaining contractual life		Aggregate intrinsic value
Outstanding at December 31, 2021		41	$	10.42		4.22	$	–
Granted		–		–		–		–
Exercised		–		–		–		–
Forfeited		–		–		–		–
Outstanding at March 31, 2022		41	$	10.42		3.97	$	–
Exercisable at March 31, 2022		41	$	10.42		3.97	$	–

As of December 31, 2019, all outstanding options were vested and there was no remaining unearned compensation expense.

Restricted Stock Awards

A Restricted Stock Award (“RSA”) represents the right to receive one share of common stock in the future. RSAs have no exercise price. The grant date fair value of the awards is equal to the Company’s closing stock price on the grant date. Lifeway expenses RSAs over the service period. Board members may elect to defer receipt of their awards until their departure from the Board of Directors, subject to shareholder ratification at the 2022 annual shareholders meeting. The following table summarizes RSA activity during the three months ended March 31, 2022.

	Restricted Stock Awards		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2021		94	$	4.50
Granted		–		–
Shares issued upon vesting		–		–
Forfeited		–		–
Outstanding at March 31, 2022		94		4.50
Vested and deferred at March 31, 2022		35	$	5.69

For the three months ended March 31, 2022 and 2021 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $63 and $36, respectively. For the three months ended March 31, 2022 and 2021 tax-related benefits of $18 and $11, respectively, were also recognized. Future compensation expense related to restricted stock awards was $135 as of March 31, 2022 and will be recognized on a weighted average basis over the next 1.12 years.

Long-Term Incentive Plan Compensation

Lifeway established long-term incentive-based compensation programs for fiscal year 2019 (the “2019 Plan”) and for fiscal year 2021 (the “2021 Plan”) for certain senior executives and key employees (the “participants”). The 2019 Plan long-term equity incentive compensation is based on Lifeway’s achievement of four strategic milestones over a three-year period from Fiscal 2019 through Fiscal 2021. The 2021 Plan long-term incentive compensation is based on Lifeway’s achievement of adjusted EBITDA performance versus the respective target established by the Board for 2021.

2020 CEO Incentive Award 

During the fourth quarter 2020, Lifeway awarded a long-term equity-based incentive of $750 to its Chief Executive Officer (the “2020 CEO Award”) depending on Lifeways 2020 performance levels compared to the respective targets. The equity-based incentive compensation is payable in restricted stock that vests one-third in April 2022, one-third in April 2023, and one-third in April 2024. The issuance of vested equity awards is subject to approval under the Stock Purchase Agreement dated October 1, 1999. For the three months ended March 31, 2022 and 2021, $85 and $90 was expensed as stock-based compensation expense in the consolidated statements of operations, respectively. As of March 31, 2022, the total remaining unearned compensation was $274, of which $144 will be recognized in 2022, $106 in 2023, $24 in 2024, respectively, subject to vesting. During Q2 2021, the number of shares awarded became fixed and determinable. Therefore, the award liability was reclassified from long-term liabilities to paid in capital.

2021 Equity Award

Under the 2021 Plan, collectively the participants can earn equity-based incentive compensation in amounts ranging from $0 to $1,069 depending on Lifeway’s achievement of the respective financial target. The equity-based incentive compensation is payable in restricted stock that is expected to vest one-third in March 2022, one-third in March 2023, and one-third in March 2024. For the three months ended March 31, 2022 and 2021, $166 and $0 was expensed as stock-based compensation expense in the consolidated statements of operations, respectively. As of March 31, 2022, the total remaining unearned compensation was $516, of which $283 will be recognized in 2022, $194 in 2023, $39 in 2024, respectively, subject to vesting. As of March 31, 2022, the number of shares to be awarded is not fixed and determinable. Therefore, the liability is classified in accrued expenses and other long-term liabilities as of March 31, 2022. When the number of shares awarded becomes fixed and determinable, the award liability will be reclassified from liabilities to paid in capital.

Retirement Benefits

Lifeway has a defined contribution plan which is available to substantially all full-time employees. Under the terms of the plan, the Company matches employee contributions under a prescribed formula. For the three months ended March 31, 2022 and 2021 total contribution expense recognized in the consolidated statements of operations was $129 and $113, respectively.