Annual report pursuant to Section 13 and 15(d)

Share-based Compensation

v3.22.1
Share-based Compensation
12 Months Ended
Dec. 31, 2021
Share-based Payment Arrangement [Abstract]  
Share-based Compensation

NOTE 16 – SHARE-BASED COMPENSATION

Share-based compensation expense consisted of the following:

 

 

Year Ended December 31,

 

 

 

 

2021

 

 

2020

 

 

Restricted stock

 

$

3,459

 

 

$

4,719

 

 

Stock options

 

 

866

 

 

 

905

 

 

Deferred stock units

 

 

1,371

 

 

 

984

 

 

Pool A Awards

 

 

4,381

 

 

 

2,328

 

 

Pool B Awards

 

 

1,617

 

 

 

1,120

 

 

Total

 

$

11,694

 

(1)

$

10,056

 

(2)

 

(1)
For the year ended December 31, 2021, $2,097 was presented as cost of services and $9,597 was presented as selling, general and administrative expenses in the consolidated statement of operations.
(2)
For the year ended December 31, 2020, $1,940 was presented as cost of services and $8,116 was presented as selling, general and administrative expenses in the consolidated statement of operations.

Long-Term Incentive Plan

On September 21, 2020, the Board of Directors approved the Amended and Restated U.S. Well Services, Inc. 2018 Stock Incentive Plan (as amended, the “LTIP”) and on May 14, 2021 it was approved by the Company's stockholders at the 2021 Annual Meeting of Stockholders. Under the LTIP, 5,414,193 shares of Class A common stock are reserved for issuance pursuant to awards under the LTIP, which includes time-based restricted stock, deferred stock units, or other performance incentive awards.

Restricted Stock

Pursuant to the LTIP, the Company grants shares of restricted Class A common stock ("restricted stock") to certain employees and directors. Restricted stock is subject to restrictions on transfer and is generally subject to a risk of forfeiture if the award recipient is no longer an employee or director of the Company prior to the lapse of the restriction. Restricted stock granted to employees generally vests over four years in equal installments each year on the anniversary of the grant date and grants to directors generally vest in full after one year. The grant date fair value of the restricted stock is determined using the closing price of the Company's Class A common stock on the grant date.

The following table summarizes the restricted stock activity for the year ended December 31, 2021:

 

 

Shares

 

 

Weighted-
Average Grant-Date
Fair Value per
Share

 

Outstanding at December 31, 2020

 

 

414,071

 

 

$

31.01

 

Granted

 

 

88,025

 

 

 

2.70

 

Vested

 

 

(102,615

)

 

 

31.19

 

Forfeited

 

 

(10,595

)

 

 

31.19

 

Outstanding at December 31, 2021

 

 

388,886

 

 

$

24.55

 

The weighted average grant date fair value per share of restricted stock granted was $2.70 during the year ended December 31, 2021. There were no restricted stock grants made during the year ended December 31, 2020. The fair value of restricted stock vested was $3,200 and $6,123 during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, total unrecognized compensation cost related to restricted stock was $3,793 which is expected to be recognized over a weighted-average period of 1.2 years.

Stock options

In 2019, the Company granted stock options under the LTIP to certain employees of the Company. The fair value of stock options on the date of grant was calculated using the Black-Scholes valuation model. These stock options were granted with seven-year terms and vest over four years in equal installments each year on the anniversary of the grant date. The expected term of the options granted was based on the safe harbor rule of the SEC Staff Accounting Bulletin No. 107 “Share-Based Payment” as the Company lacks historical exercise data to estimate the expected term of these options. The expected stock price volatility is calculated based on the Company’s peer group because the Company does not have sufficient historical data and will continue to use peer group volatility information until historical volatility of the Company is available to measure expected volatility for future grants. The exercise price for stock options granted equals the closing market price of the underlying stock on the date of grant. These options are time-based and are not based upon attainment of performance goals.

The following table summarizes the stock option activity for the year ended December 31, 2021:

 

 

Shares

 

 

Weighted-
Average
Exercise Price
per Share

 

 

Weighted-Average
Remaining
Contractual
Life (in years)

 

Outstanding at December 31, 2020

 

 

250,649

 

 

$

31.19

 

 

 

5.21

 

Granted

 

 

-

 

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited/Expired

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at December 31, 2021

 

 

250,649

 

 

$

31.19

 

 

 

4.21

 

Exercisable at December 31, 2021

 

 

125,325

 

 

$

31.19

 

 

 

4.21

 

During the years ended December 31, 2021 and 2020, no stock options were granted or exercised. As of December 31, 2021, the total unrecognized compensation cost related to stock options was $1,040 which is expected to be recognized over a weighted average period of 1.21 years.

Deferred Stock Units

The Company awards deferred stock units ("DSUs") to certain key employees of the Company pursuant to the LTIP. Each DSU represents the right to receive one share of the Company’s Class A common stock. DSUs generally vest over three years in equal installments each year on the anniversary of the vesting effective date, subject to the grantee’s continuous service through each vesting period. The grant date fair value of the DSU is determined using the closing price of the Company's Class A common stock on the grant date.

The following table summarizes the DSUs activity for the year ended December 31, 2021:

 

 

Units

 

 

Weighted-
Average Grant Date
Fair Value per
Unit

 

Outstanding at December 31, 2020

 

 

2,546,249

 

 

$

1.16

 

Granted

 

 

404,294

 

 

 

2.87

 

Vested

 

 

(873,408

)

 

 

1.16

 

Forfeited

 

 

(24,661

)

 

 

1.16

 

Outstanding at December 31, 2021

 

 

2,052,474

 

 

$

1.49

 

The weighted average grant date fair value per unit of DSUs granted was $2.87 and $1.16 during the years ended December 31, 2021 and 2020, respectively. The fair value of DSUs vested was $1,009 during the year ended December 31, 2021. No DSUs vested during the year ended December 31, 2020. As of December 31, 2021, the total unrecognized compensation cost related to DSUs was $1,730 which is expected to be recognized over a weighted average period of 1.45 years.

Pool A Performance Awards

The Company grants Pool A Performance Awards (“Pool A Awards”) to certain key employees of the Company. Each Pool A Award represents the right to receive, at the Company’s election, a fixed monetary amount either in cash or a variable number of shares of the Company’s Class A common stock based on its closing share price on the date of settlement. The Pool A Awards vest in full one year on the anniversary of the vesting effective date specified in the applicable award agreement but settlement does not occur until the fifth anniversary of the grant date.

The Company accounts for the Pool A Awards under liability accounting as a result of the fixed monetary amount that could be settled either in cash or a variable number of shares of the Company’s Class A common stock. Since the settlement will not occur until the fifth anniversary of the grant date, the Company considers the delayed settlement as a post-vesting restriction which would impact the determination of grant-date fair value of the award.

During the year ended December 31, 2021, the Company granted Pool A Awards that will fully vest on January 1, 2022 (the "2021 Pool A Awards"). During the year ended December 31, 2020, the Company granted Pool A Awards which fully vested on January 1, 2021 (the "2020 Pool A Awards"). The grant date fair value of the 2020 Pool A Awards and 2021 Pool A Awards was $2,183 and $2,718, respectively.

As of December 31, 2021, the fair value of the 2020 Pool A Awards and 2021 Pool A Awards liabilities were remeasured to $3,098 and $3,611, respectively, and is presented as other long-term liabilities in the consolidated balance sheets. The fair value was estimated using a risk-adjusted discount rate reflecting the weighted-average cost of capital of similarly traded public companies.

As of December 31, 2021, the total unrecognized compensation cost related to Pool A Awards was $3,932, which is expected to be recognized over a weighted average period of 4.33 years.

Pool B Performance Awards

The Company grants Pool B Performance Awards ("Pool B Awards") to certain key employees of the Company. Each Pool B Award represents the right to receive, at the Company’s election, either a cash payment calculated in accordance with the award agreement, or a fixed number of shares of the Company’s Class A common stock. The Pool B Awards vest over three years in equal installments each year on the anniversary of the vesting effective date specified in the applicable award agreement, subject to the grantee’s continuous services through each vesting period. The grant date fair value of the Pool B Awards is determined using the closing price of the Company's Class A common stock on the grant date.

The following table summarizes the Pool B Awards activity for the year ended December 31, 2021:

 

 

Fair Value

 

Outstanding at December 31, 2020

 

$

3,356

 

Granted

 

 

1,499

 

Vested

 

 

(1,151

)

Forfeited

 

 

(32

)

Outstanding at December 31, 2021

 

$

3,672

 

The grant date fair value of the Pool B Awards granted was $1,499 and $3,362, during the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, the total unrecognized compensation cost related to Pool B Awards was $2,086, which is expected to be recognized over a weighted average period of 1.48 years.