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STOCK-BASED COMPENSATION | 3 Months Ended
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Mar. 31, 2017
STOCK-BASED COMPENSATION |
STOCK-BASED COMPENSATION | 17 - STOCK-BASED COMPENSATION On July 7, 2016, the Company completed a one-for-ten reverse stock split of its common stock. As a result, all share and per share information included for all periods presented in these condensed consolidated financial statements reflect the reverse stock split. On October 13, 2016, Peter C. Georgiopoulos resigned as Chairman of the Board and a director of the Company. In connection with his departure, Mr. Georgiopoulos entered into a Separation Agreement and a Release Agreement with the Company on October 13, 2016. Under the terms of these agreements, subject to customary conditions, Mr. Georgiopoulos received an amount equal to the annual Chairman’s fee awarded to him in recent years of $500 as a severance payment and full vesting of his unvested equity awards, which consist of grants of 68,581 restricted shares of the Company’s common stock and warrants exercisable for approximately 213,937 shares of the Company’s common stock with an exercise price per share ranging $259.10 to $341.90. The acceleration of the vesting of Mr. Georgiopoulos’ restricted shares and warrants resulted in $5,317 of nonvested stock amortization expense during the three months ended December 31, 2016. 2014 Management Incentive Plan On the Effective Date, pursuant to the Chapter 11 Plan, the Company adopted the Genco Shipping & Trading Limited 2014 Management Incentive Plan (the “MIP”). An aggregate of 9,668,061 shares of Common Stock were available for award under the MIP prior to the Company’s reverse stock split, which is equivalent to approximately 966,806 shares on a post-split basis. Awards under the MIP took the form of restricted stock grants and three tiers of MIP Warrants with staggered strike prices based on increasing equity values. The number of shares of common stock available under the Plan represented approximately 1.8% of the shares of post-emergence Common Stock outstanding as of the Effective Date on a fully-diluted basis. Awards under the MIP were available to eligible employees, non-employee directors and/or officers of the Company and its subsidiaries (collectively, “Eligible Individuals”). Under the MIP, a committee appointed by the Board from time to time (or, in the absence of such a committee, the Board) (in either case, the “Plan Committee”) may grant a variety of stock-based incentive awards, as the Plan Committee deems appropriate, to Eligible Individuals. The MIP Warrants are exercisable on a cashless basis and contain customary anti-dilution protection in the event of any stock split, reverse stock split, stock dividend, reclassification, dividend or other distributions (including, but not limited to, cash dividends), or business combination transaction. On August 7, 2014, pursuant to the MIP, certain individuals were granted MIP Warrants whereby each warrant can be converted on a cashless basis for the amount in excess of the respective strike price. The MIP Warrants were issued in three tranches for 2,380,664, 2,467,009 and 3,709,788 shares. Following the Company’s reverse stock split, these MIP warrants are exercisable for approximately 238,066, 246,701, and 370,979 shares and have exercise prices of $259.10 (the “$259.10 Warrants”), $287.30 (the “$287.30 Warrants”) and $341.90 (the “$341.90 Warrants”) per whole share, respectively. The fair value of each warrant upon emergence from bankruptcy was $7.22 for the $259.10 Warrants, $6.63 for the $287.30 Warrants and $5.63 for the $341.90 Warrants. The warrant values were based upon a calculation using the Black-Scholes-Merton option pricing formula. This model uses inputs such as the underlying price of the shares issued when the warrant is exercised, volatility, cost of capital interest rate and expected life of the instrument. The Company has determined that the warrants should be classified within Level 3 of the fair value hierarchy by evaluating each input for the Black-Scholes-Merton option pricing formula against the fair value hierarchy criteria and using the lowest level of input as the basis for the fair value classification. The Black-Scholes-Merton option pricing formula used a volatility of 43.91% (representing the six-year volatility of a peer group), a risk-free interest rate of 1.85% and a dividend rate of 0%. The aggregate fair value of these awards upon emergence from bankruptcy was $54,436. The warrants vest 33.33% on each of the first three anniversaries of the grant date, with accelerated vesting upon a change in control of the Company. For the three months ended March 31, 2017 and 2016, the Company recognized amortization expense of the fair value of these warrants, which is included in General and administrative expenses, as follows:
|  | For the Three Months Ended |
|  | March 31, |
|  | 2017 |  | 2016 |
General and administrative expenses |  | $ | 372 |  | $ | 3,765 |
Amortization of the unamortized stock-based compensation balance of $530 as of March 31, 2017 is expected to be expensed during the remainder of 2017. The following table summarizes the unvested warrant activity for the three months ended March 31, 2017:
|  |  |  | Weighted |  | Weighted |
|  | Number of |  | Average Exercise |  | Average Fair |
|  | Warrants |  | Price |  | Value |
Outstanding at January 1, 2017 - Unvested |  | 713,122 |  | $ | 303.12 |  | $ | 6.36 |
Granted |  | — |  |  | — |  |  | — |
Exercisable |  | — |  |  | — |  |  | — |
Exercised |  | — |  |  | — |  |  | — |
Forfeited |  | — |  |  | — |  |  | — |
Outstanding at March 31, 2017 - Unvested |  | 713,122 |  | $ | 303.12 |  | $ | 6.36 |
The following table summarizes certain information about the warrants outstanding as of March 31, 2017:
|  |  | Warrants Outstanding and Unvested, |  | Warrants Outstanding and Exercisable, |
|  |  | March 31, 2017 |  | March 31, 2017 |
Weighted |  |  |  |  |  | Weighted |  |  |  |  |  | Weighted |
Average |  |  |  | Weighted |  | Average |  |  |  | Weighted |  | Average |
Exercise Price of |  |  |  | Average |  | Remaining |  |  |  | Average |  | Remaining |
Outstanding |  | Number of |  | Exercise |  | Contractual |  | Number of |  | Exercise |  | Contractual |
Warrants |  | Warrants |  | Price |  | Life |  | Warrants |  | Price |  | Life |
$ | 303.12 |  | 713,122 |  | $ | 303.12 |  | 3.36 |  | 7,844,339 |  | $ | 303.12 |  | 3.36 |
As of March 31, 2017 and December 31, 2016, a total of 8,557,461 of warrants were outstanding. The nonvested stock awards granted under the MIP will vest ratably on each of the three anniversaries of August 7, 2014. The table below summarizes the Company’s nonvested stock awards for the three months ended March 31, 2017 which were issued under the MIP:
|  |  |  | Weighted |
|  | Number of |  | Average Grant |
|  | Shares |  | Date Price |
Outstanding at January 1, 2017 |  | 9,255 |  | $ | 200.00 |
Granted |  | — |  |  | — |
Vested |  | — |  |  | — |
Forfeited |  | — |  |  | — |
Outstanding at March 31, 2017 |  | 9,255 |  | $ | 200.00 |
There were no shares that vested under the MIP during the three months ended March 31, 2017 and 2016. The total fair value is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date. For the three months ended March 31, 2017 and 2016, the Company recognized nonvested stock amortization expense for the MIP restricted shares, which is included in General and administrative expenses, as follows:
|  | For the Three Months Ended |
|  | March 31, |
|  | 2017 |  | 2016 |
General and administrative expenses |  | $ | 152 |  | $ | 1,536 |
The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of March 31, 2017, unrecognized compensation cost of $216 related to nonvested stock will be recognized over a weighted-average period of 0.35 years. 2015 Equity Incentive Plan On June 26, 2015, the Company’s Board of Directors approved the 2015 Equity Incentive Plan for awards with respect to an aggregate of 4,000,000 shares of common stock, or 400,000 shares following the Company’s reverse stock split (the “2015 Plan”). Under the 2015 Plan, the Company’s Board of Directors, the compensation committee, or another designated committee of the Board of Directors may grant a variety of stock-based incentive awards to the Company’s officers, directors, employees, and consultants. Awards may consist of stock options, stock appreciation rights, dividend equivalent rights, restricted (nonvested) stock, restricted stock units, and unrestricted stock. As of March 31, 2017, the Company has awarded restricted stock units, restricted stock and stock options under the 2015 Plan. On March 23, 2017, the Board of Directors approved an amendment and restatement of the 2015 Plan. This amendment and restatement increases the number of shares available for awards under the plan from 400,000 to 2,750,000, subject to shareholder approval; sets the annual limit for awards to non-employee directors and other individuals as 500,000 and 1,000,000 shares, respectively; and modifies the change in control definition. Stock Options On March 23, 2017, the Company issued options to purchase 133,000 of the Company’s shares of common stock to John C. Wobensmith, Chief Executive Officer and President, with an exercise price of $11.13 per share. One-third of the options become exercisable on each of the first three anniversaries of October 15, 2016, with accelerated vesting upon a change in control of the Company, and all unexercised options expire on the sixth anniversary of the grant date. The fair value of each option was estimated on the date of the grant using the Black-Scholes-Merton pricing formula, resulting in a value of $6.41 per share, or $853 in the aggregate. The assumptions used in the Black-Scholes-Merton option pricing formula are as follows: volatility of 79.80% (representing a blend of the Company’s historical volatility and a peer-based volatility estimate), a risk-free interest rate of 1.68%, a dividend yield of 0%, and expected life of 3.78 years (determined using the simplified method as outlined in Staff Accounting Bulletin 14 – Share-Based Payment (“SAB Topic 14”) due to lack of historical exercise data). For the three months ended March 31, 2017 and 2016, the Company recognized amortization expense of the fair value of these options, which is included in General and administrative expenses, as follows:
|  | For the Three Months Ended |
|  | March 31, |
|  | 2017 |  | 2016 |
General and administrative expenses |  | $ | 20 |  | $ | — |
Amortization of the unamortized stock-based compensation balance of $833 as of March 31, 2017 is expected to be expensed $492, $254 and $87 during the remainder of 2017 and during the years ended December 31, 2018 and 2019, respectively. The following table summarizes the option activity for the three months ended March 31, 2017:
|  |  |  | Weighted |  | Weighted |
|  | Number of |  | Average Exercise |  | Average Fair |
|  | Options |  | Price |  | Value |
Outstanding at January 1, 2017 |  | — |  | $ | — |  | $ | — |
Granted |  | 133,000 |  |  | 11.13 |  |  | 6.41 |
Exercisable |  | — |  |  | — |  |  | — |
Exercised |  | — |  |  | — |  |  | — |
Forfeited |  | — |  |  | — |  |  | — |
Outstanding at March 31, 2017 |  | 133,000 |  | $ | 11.13 |  | $ | 6.41 |
The following table summarizes certain information about the options outstanding as of March 31, 2017:
|  |  | Options Outstanding and Unvested, |  | Options Outstanding and Exercisable, |
|  |  | March 31, 2017 |  | March 31, 2017 |
Weighted |  |  |  |  |  |  | Weighted |  |  |  |  |  |  | Weighted |
Average |  |  |  | Weighted |  | Average |  |  |  | Weighted |  | Average |
Exercise Price of |  |  |  | Average |  | Remaining |  |  |  | Average |  | Remaining |
Outstanding |  | Number of |  | Exercise |  | Contractual |  | Number of |  | Exercise |  | Contractual |
Options |  | Options |  | Price |  | Life |  | Warrants |  | Price |  | Life |
$ | 11.13 |  | 133,000 |  | $ | 11.13 |  | 5.98 |  | — |  | $ | — |  | — |
As of March 31, 2017, there were no vested stock options. Restricted Stock Units The Company has issued restricted stock units (“RSUs”) under the 2015 Plan to certain members of the Board of Directors and John C. Wobensmith, Chief Executive Officer and President, which represent the right to receive a share of common stock, or in the sole discretion of the Company’s Compensation Committee, the value of a share of common stock on the date that the RSU vests. As of March 31, 2017 and December 31, 2016, 3,138 shares of the Company’s common stock were outstanding in respect of the RSUs. Such shares will only be issued in respect of vested RSUs issued to directors when the director’s service with the Company as a director terminates. Such shares will only be issued to Mr. Wobensmith when his RSUs vest under the terms of his contract and the amended 2015 Plan described above. The RSUs that have been issued to certain members of the Board of Directors generally vest on the date of the annual shareholders meeting of the Company following the date of the grant. The RSUs that have been issued to John C. Wobensmith vest ratably on each of the three anniversaries of October 15, 2016. The table below summarizes the Company’s unvested RSUs for the three months ended March 31, 2017:
|  |  |  | Weighted |
|  | Number of |  | Average Grant |
|  | RSUs |  | Date Price |
Outstanding at January 1, 2017 |  | 66,666 |  | $ | 5.10 |
Granted |  | 292,398 |  |  | 11.13 |
Vested |  | — |  |  | — |
Forfeited |  | — |  |  | — |
Outstanding at March 31, 2017 |  | 359,064 |  | $ | 10.01 |
The total fair value of the RSUs that vested during the three months ended March 31, 2017 and 2016 was $0 and $12, respectively. The total fair value is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date. On February 17, 2016, the vesting of 23,286 outstanding RSUs, or 2,328 outstanding RSUs on a post-reverse stock split basis, was accelerated upon the resignation of two members on the Company’s Board of Directors. The following table summarizes certain information of the RSUs unvested and vested as of March 31, 2017:
Unvested RSUs |  | Vested RSUs |
March 31, 2017 |  | March 31, 2017 |
|  |  |  | Weighted |  |  |  |  |
|  | Weighted |  | Average |  |  |  | Weighted |
|  | Average |  | Remaining |  |  |  | Average |
Number of |  | Grant Date |  | Contractual |  | Number of |  | Grant Date |
RSUs |  | Price |  | Life |  | RSUs |  | Price |
359,064 |  | $ | 10.01 |  | 2.09 |  | 7,440 |  | $ | 71.18 |
The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of March 31, 2017, unrecognized compensation cost of $3,223 related to RSUs will be recognized over a weighted-average period of 2.09 years. For the three months ended March 31, 2017 and 2016, the Company recognized nonvested stock amortization expense for the RSUs, which is included in General and administrative expenses as follows:
|  | For the Three Months Ended |
|  | March 31, |
|  | 2017 |  | 2016 |
General and administrative expenses |  | $ | 159 |  | $ | 155 |
Restricted Stock Under the 2015 Plan, grants of restricted common stock issued to executives and Peter C. Georgiopoulos, the Company’s former Chairman of the Board, ordinarily vest ratably on each of the three anniversaries of the determined vesting date. The table below summarizes the Company’s nonvested stock awards for the three months ended March 31, 2017 which were issued under the 2015 Plan:
|  |  |  | Weighted |
|  | Number of |  | Average Grant |
|  | Shares |  | Date Price |
Outstanding at January 1, 2017 |  | 13,605 |  | $ | 5.20 |
Granted |  | — |  |  | — |
Vested |  | — |  |  | — |
Forfeited |  | — |  |  | — |
Outstanding at March 31, 2017 |  | 13,605 |  | $ | 5.20 |
There were no shares that vested under the 2015 Plan during the three months ended March 31, 2017 and 2016. The total fair value is calculated as the number of shares vested during the period multiplied by the fair value on the vesting date. For the three months ended March 31, 2017 and 2016, the Company recognized nonvested stock amortization expense for the 2015 Plan restricted shares, which is included in General and administrative expenses, as follows:
|  | For the Three Months Ended |
|  | March 31, |
|  | 2017 |  | 2016 |
General and administrative expenses |  | $ | 8 |  | $ | 30 |
The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of March 31, 2017, unrecognized compensation cost of $34 related to nonvested stock will be recognized over a weighted-average period of 1.63 years.

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