The Board adopted The GEO Group, Inc. Amended and Restated 2018 Stock Incentive Plan (the "2018 Amended and Restated Plan"), which was approved by the Company's shareholders on April 28, 2021. The 2018 Amended and Restated Plan supersedes the previous 2018 Stock Incentive Plan. As of the date the 2018 Amended and Restated Plan was approved by the Company’s shareholders, it provided for a reserve of an additional 16,800,000 shares of common stock that may be issued pursuant to awards granted under the 2018 Amended and Restated Plan. The Company filed a Form S-8 registration statement related to the 2018 Amended and Restated Plan on June 15, 2021.

The Company uses a Black-Scholes option valuation model to estimate the fair value of each time-based or performance-based option awarded. For options granted during the six months ended June 30, 2023, the fair value was estimated using the following assumptions: (i) volatility of 52.34%; (ii) expected term of 5 years and (iii) risk free interest rate of 4.27%. A summary of the activity of stock option awards issued and outstanding under Company plans was as follows for the six months ended June 30, 2023:


	Shares			Wtd. Avg. Exercise Price		Wtd. Avg. Remaining Contractual Term (years)		Aggregate Intrinsic Value
	(in thousands)							(in thousands)
Options outstanding at January 1, 2023		1,885		$	18.03		6.23	$	73
Options granted		362			9.07
Options exercised		(13	)		6.63
Options forfeited/canceled/expired		(106	)		14.06
Options outstanding at June 30, 2023		2,128		$	16.78		6.07	$	373
Options vested and expected to vest at June 30, 2023		2,041		$	17.15		5.94	$	339
Options exercisable at June 30, 2023		1,411		$	21.04		4.72	$	88

On March 1, 2023, the Company granted approximately 362,000 options to certain employees which had a per share grant date fair value of $4.53. For the six months ended June 30, 2023 and 2022, the amount of stock-based compensation expense related to stock options was $0.3 million and $0.3 million, respectively. As of June 30, 2023, the Company had $1.9 million of unrecognized compensation costs related to non-vested stock option awards that are expected to be recognized over a weighted average period of 3.3 years.

Compensation expense for nonvested stock awards is recorded over the vesting period based on the fair value at the date of grant. Generally, the restricted stock awards vest in equal increments generally over either a three or four-year period. The fair value of restricted stock awards, which do not contain a market-based vesting condition, is determined using the closing price of the Company's common stock on the date of grant. The Company has historically issued share-based awards with service-based, performance-based and market-based vesting criteria.

A summary of the activity of restricted stock outstanding is as follows for the six months ended June 30, 2023:


	Shares			Wtd. Avg. Grant Date Fair Value
	(in thousands)
Restricted stock outstanding at January 1, 2023		3,595		$	8.29
Granted		1,758			9.16
Vested		(1,252	)		11.57
Forfeited/canceled		(25	)		8.87
Restricted stock outstanding at June 30, 2023		4,076		$	7.79

During the six months ended June 30, 2023, the Company granted 1,758,455 shares of restricted stock to certain employees and executive officers. Of these awards, 422,121 are market and performance-based awards which will be forfeited if the Company does not achieve certain annual metrics during 2023, 2024 and 2025.

The vesting of these performance-based restricted stock grants are subject to the achievement by GEO of two annual performance metrics as follows: (i) up to 50% of the shares of restricted stock ("TSR Target Award") can vest at the end of a three year performance period if GEO meets certain total shareholder return ("TSR") performance targets, as compared to the total shareholder return of a peer group of companies, over a three year period from January 1, 2023 to December 31, 2025 and (ii) up to 50% of the shares of restricted stock ("ROCE Target Award") can vest at the end of a three year period if GEO meets certain return on capital employed ("ROCE") performance targets over a three year period from January 1, 2023 to December 31, 2025. These market and performance awards can vest at between 0% and 200% of the target awards for both metrics. The number of shares shown for the performance-based awards is based on the target awards for both metrics.

The metric related to ROCE is considered to be a performance condition. For share-based awards that contain a performance condition, the achievement of the targets must be probable before any share-based compensation expense is recorded. The Company reviews the likelihood of which target in the range will be achieved and if deemed probable, compensation expense is recorded at that time. If subsequent to initial measurement there is a change in the estimate of the probability of meeting the performance condition, the effect of the change in the estimated quantity of awards expected to vest is recognized by cumulatively adjusting compensation expense. If ultimately the performance targets are not met, for any awards where vesting was previously deemed probable, previously recognized compensation expense will be reversed in the period in which vesting is no longer deemed probable. The fair value of these awards was determined based on the closing price of the Company's common stock on the date of grant.

The metric related to TSR is considered to be a market condition. For share-based awards that contain a market condition, the probability of satisfying the market condition must be considered in the estimate of grant-date fair value and previously recorded compensation expense is not reversed if the market condition is never met. The fair value of these awards was determined based on a Monte Carlo simulation, which calculates a range of possible outcomes and the probabilities that they will occur, using the following weighted average key assumptions: (i) volatility of 62.9%; (ii) beta of 0.92; and (iii) risk free rate of 4.60%.

For the six months ended June 30, 2023 and 2022, the Company recognized $8.9 million and $9.6 million, respectively, of compensation expense related to its restricted stock awards. As of June 30, 2023, the Company had $22.5 million of unrecognized compensation costs related to non-vested restricted stock awards, including non-vested restricted stock awards with performance-based and market-based vesting, that are expected to be recognized over a weighted average period of 2.6 years.

The Company previously adopted The GEO Group Inc. 2011 Employee Stock Purchase Plan (the “Plan" or "ESPP”) effective July 9, 2011. The Company has since amended and restated the Plan (the “Amended ESPP”) which was approved by the Company’s shareholders on April 28, 2021 and became effective on July 9, 2021. The purpose of the Amended ESPP, which is qualified under Section 423 of the Code, is to encourage stock ownership through payroll deductions by the employees of GEO and designated subsidiaries of GEO in order to increase their identification with the Company’s goals and secure a proprietary interest in the Company’s success. These deductions are used to purchase shares of the Company’s common stock at a 5% discount from the then current market price. The maximum number of shares of common stock reserved for issuance over the term of the Amended ESPP on the amended effective date shall not exceed 506,023 shares.

The Amended ESPP is considered to be non-compensatory. As such, there is no compensation expense required to be recognized. Share purchases under the Amended ESPP are made on the last day of each month. During the six months ended June 30, 2023 and 2022, 11,117 and 13,801 shares, respectively, of the Company's common stock were issued in connection with the Amended ESPP.