STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

At December 31, 2020, the Company had one stock-based payment arrangement outstanding, the Vidler Water Resources, Inc. 2014 Equity Incentive Plan (the “2014 Plan”).

The 2014 Plan provides for the issuance of up to 3.3 million shares of common stock in the form of performance-based price-contingent stock options (“PBO”), restricted stock unit (“RSU”), stock-settled stock appreciation rights (“SAR”), non-statutory stock options, restricted stock awards (“RSA”), performance shares, performance units, deferred compensation awards, and other stock-based awards to employees, directors, and consultants of the Company (or any present or future parent or subsidiary corporation or other affiliated entity of the Company). The 2014 Plan allows for broker assisted cashless exercises and net-settlement of income taxes and employee withholding taxes. Upon exercise of a PBO, RSU, and SAR, the employee will receive newly issued shares of Vidler common stock with a fair value equal to the in-the-money value of the award, less applicable federal, state and local withholding and income taxes (however, the holder can elect to pay withholding taxes in cash).

The Company recorded total stock-based compensation expense of $540,000 and $87,000 during the years ended December 31, 2020 and 2019, respectively.

Performance-Based Options (PBO):

At various times, the Company has awarded PBO to various members of management. All of the PBO issued contain a market condition based on the achievement of a stock price target during the contractual term and vest monthly over a three-year period. The vested portion of the options may be exercised only if the 30-trading-day average closing sales price of the Company’s common stock equals or exceeds 125% of the grant date stock price. The stock price contingency may be met any time before the options expire and it only needs to be met once for the PBO to remain exercisable for the remainder of the term. Compensation expense is amortized on a straight-line basis over the requisite service period for the entire award, which is the vesting period of the award. However, any unrecognized compensation expense for unvested awards can be accelerated if the vesting period is modified.

The estimated fair value of the Company’s PBO was determined using a Monte Carlo model, which incorporated the following assumptions:


	2014 10-Year Option
Grant date	11/14/2014
Expiration date	11/14/2024
Grant date stock price	$	19.51
Historical volatility	35.00		%
Risk-free rate (annualized)	2.38		%
Dividend yield (annualized)	—		%
PBO granted	167,619
Weighted average grant date fair value	$	6.51
Fair value of award on grant date	$	1,475,705

The determination of the fair value of PBO using an option valuation model is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables. The volatility is calculated through an analysis based on historical daily returns of Vidler’s stock over a look-back period equal to the PBO contractual term. The risk-free interest rate assumption is based upon a risk-neutral framework using the 10-year zero-coupon risk-free interest rates derived from the treasury constant maturities yield curve on the grant date, for the 10-year PBO award. The dividend yield assumption was based on the expectation of no future dividend payouts by the Company.

A summary of PBO activity was as follows:


	Performance-Based Options	Weighted-Average Exercise Price Per Share
Outstanding at December 31, 2018	167,619	$	14.51
Granted	—
Forfeited	—
Outstanding at December 31,2019	167,619	$	14.51
Granted	—
Forfeited	—
Outstanding at December 31, 2020	167,619	$	14.51

At December 31, 2020, 167,619 PBO outstanding are exercisable for up to 10 years from the grant date.


	Performance-Based Options	Weighted-Average Exercise Price Per Share		Weighted-Average Contractual Term Remaining (Years)	Aggregate Intrinsic Value
Vested at December 31, 2018	167,619	$	14.51	5.9	$	—
Vested	—
Forfeited	—
Vested at December 31, 2019	167,619	$	14.51	4.9	$	—
Vested	—
Forfeited	—
Vested at December 31, 2020	167,619	$	14.51	3.9	$	—

For the years ended December 31, 2020 and 2019, there were no PBO exercisable as the market condition had not been met. There was no unrecognized compensation cost related to unvested PBO at December 31, 2020 and 2019.

Restricted Stock Units (RSU):

RSU awards the recipient, who must be continuously employed by the Company until the vesting date, unless the employment contracts stipulate otherwise, the right to receive one share of the Company’s common stock. RSU issued to management do not vote and are not entitled to receive dividends, however the RSU issued to the Company’s directors are entitled to dividends.

A summary of RSU activity was as follows:


	RSU Shares	Weighted-Average Grant Date Fair Value Per Share
Outstanding and unvested at December 31, 2018	—	$	—
Granted	9,268	$	9.44
Vested	(9,268)	$	9.44
Forfeited	—	$	—
Outstanding and unvested at December 31, 2019	—	$	—
Granted	58,938	$	9.17
Vested	(58,938)	$	9.17
Forfeited	—	$	—
Outstanding and unvested at December 31, 2020	—	$	—

There was no unrecognized compensation cost related to unvested RSU for the years ended December 31, 2020, and 2019.