Stock-Based Compensation

12 Months Ended

Dec. 31, 2022

16. Stock-Based Compensation

Long-term incentive plan

During 1995, we established the 1995 Long-Term Incentive Stock Option Plan (the “Plan”), which permits the granting of stock options (including incentive stock options and nonqualified stock options) stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards or any combination of these to employees, directors or consultants. The Plan was amended and restated effective April 22, 2016 and expires on April 21, 2026; the total number of shares that could be issued under the Plan is 7,281,758. As of December 31, 2022, 5,157,507 shares have been issued under the Plan, zero stock options and 2,124,251 restricted stock units (RSUs) were outstanding under the Plan, while 1,718,242 shares remain for future grants under the Plan.

We recognize compensation expense on a pro rata straight-line basis over the requisite service period for stock-based compensation awards with both graded and cliff vesting terms. We recognize the cumulative effect of a change in the number of awards expected to vest in compensation expense in the period of change. We have not capitalized any portion of our stock-based compensation. Our forfeiture rate is based on actuals.

During the years ended December 31, 2022 and 2021, we recognized $2.0 million and $1.0 million, respectively, of stock-based compensation expense under the fair value method. Accordingly, we recognized associated deferred income tax expense of $140 thousand and $111 thousand before valuation allowance, respectively, during the years ended December 31, 2022 and 2021. During the years ended December 31, 2022 and 2021, there were no stock-based compensation expense related to the change in fair value of cash-settled RSUs, which we account for as a liability.

On February 23, 2022, we entered into a Securities Purchase Agreement with Lind Global Fund II LP (“Lind Global”), pursuant to which we issued to Lind Global a two-year, secured, interest-free convertible promissory note in the amount of $5.75 million (the “Convertible Note”) and a common stock purchase warrant to acquire 1,283,732 shares of our common stock (the “Warrant”) (See Note 13).

Restricted Stock Units

During the years ended December 31, 2022 and 2021, we issued RSUs to employees which vest upon the achievement of specific market-based or time-based measures. The fair value for RSU's is calculated based on the stock price on the grant date and expensed ratably over the requisite service period as market-based results achieved, which ranges between one year and five years. The following table summarizes the information about vested and unvested restricted stock units for the years ended December 31, 2022 and 2021.

	Number of Shares			Weighted Average Fair Value

Nonvested RSUs at January 1, 2021		1,719,732		$	1.36
RSUs granted		983,661			1.69
RSUs forfeited		(631,367	)		0.88
RSUs vested		(476,361	)		1.71

Nonvested RSUs at December 31, 2021		1,595,665		$	1.77

Nonvested RSUs at January 1, 2022		1,595,665		$	1.77
RSUs granted		1,790,250			1.49
RSUs forfeited		(472,969	)		2.13
RSUs vested		(788,695	)		1.68

Nonvested RSUs at December 31, 2022		2,124,251		$	1.40

As of December 31, 2022, we had $1.2 million of unrecognized compensation expense related to the RSUs expected to be recognized on a pro-rata straight line basis over a weighted average remaining service period of approximately 1.5 years.

GSE’s 1995 long-term incentive program (“LTIP”) provides for the issuance of performance-vesting and time-vesting restricted stock units to certain executives and employees. Vesting of the performance-vesting restricted stock units (“PRSU”) is contingent upon the employee’s continued employment and the Company’s achievement of certain performance goals during designated performance periods as established by the Compensation Committee of the Company’s Board of Directors. We recognize compensation expense, net of estimated forfeitures, for PRSUs on a straight-line basis over the performance period based on the probable outcome of achievement of the financial targets. At the end of each reporting period, we estimate the number of PRSUs that are expected to vest, based on the probability and extent to which the performance goals will be met, and take into account these estimates when calculating the expense for the period. If the number of shares expected to be earned changes during the performance period, we make a cumulative adjustment to compensation expense based on the revised number of shares expected to be earned.

During the year ended December 31, 2022, we granted approximately 990,250 RSUs with an aggregate fair value of approximately $1.5 million. During the year ended December 31, 2021, we granted approximately 983,661 time-based RSUs with an aggregate fair value of approximately $1.7 million. During the year ended December 31, 2022, we vested 588,695 RSUs compared to 476,361 RSUs vested during the year ended December 31, 2021. A portion of the time-based RSUs vest quarterly in equal amounts over the course of eight quarters, and the remainder vest annually in equal amounts over the course of one to three years.

During the year ended December 31, 2022, we granted 800,000 PRSUs including 200,000 cash-settled grants to employees. These grants are subject to multiple vesting criteria including reaching a 20-day VWAP of $1.94 prior to the expiration of the awards, and a time-vesting restriction, which will vest in equal portions over the next 15 quarters ending December 31, 2025. During the year ended December 31, 2022, we vested 200,000 PRSUs, of which, 50,000 PRSUs were cash-settled, respectively. No PRSUs were vested during the year ended December 31, 2021. The market vesting criteria was achieved in April 2022 for the 800,000 PRSUs which will fully vest over the next 12 quarters. During the year ended December 31, 2021, we did not grant any PRSUs to employees.