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STOCK-BASED COMPENSATION | 9 Months Ended
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Sep. 30, 2019
STOCK-BASED COMPENSATION |
STOCK-BASED COMPENSATION | 15 - STOCK-BASED COMPENSATION 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 966,806 shares of Common Stock were available for award under the MIP. 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”) could 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 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 vested 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 and nine months ended September 30, 2019 and 2018, there was no amortization expense of the fair value of these warrants. As of September 30, 2019, there was no unamortized stock-based compensation for the warrants and all warrants were vested. The following table summarizes certain information about the warrants outstanding as of September 30, 2019:
Warrants Outstanding and Unvested, |  | Warrants Outstanding and Exercisable, |
September 30, 2019 |  | September 30, 2019 |
|  |  |  | Weighted |  |  |  |  |  |  | Weighted |
|  | Weighted |  | Average |  |  |  | Weighted |  | Average |
|  | Average |  | Remaining |  |  |  | Average |  | Remaining |
Number of |  | Exercise |  | Contractual |  | Number of |  | Exercise |  | Contractual |
Warrants |  | Price |  | Life |  | Warrants |  | Price |  | Life |
— |  | $ | — |  | — |  | 8,557,461 |  | $ | 303.12 |  | 0.86 |
As of September 30, 2019 and December 31, 2018, a total of 8,557,461 of warrants were outstanding. 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 400,000 shares of common stock (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 September 30, 2019, 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 increased the number of shares available for awards under the plan from 400,000 to 2,750,000, subject to shareholder approval; set the annual limit for awards to non-employee directors and other individuals as 500,000 and 1,000,000 shares, respectively; and modified the change in control definition. The Company’s shareholder’s approved the increase in the number of shares at the Company’s 2017 Annual Meeting of Shareholders on May 17, 2017. 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 due to limited trading history since emergence from bankruptcy), 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). On February 27, 2018, the Company issued options to purchase 122,608 of the Company’s shares of common stock to certain individuals with an exercise price of $13.69 per share. One third of the options become exercisable on each of the first three anniversaries of February 27, 2018, with accelerated vesting that may occur following 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 $7.55 per share, or $926 in the aggregate. The assumptions used in the Black-Scholes-Merton option pricing formula are as follows: volatility of 71.94% (representing a blend of the Company’s historical volatility and a peer-based volatility estimate due to limited trading history post recapitalization of the Company in November 2016), a risk-free interest rate of 2.53%, a dividend yield of 0%, and expected life of 4.00 years (determined using the simplified method as outlined in SAB Topic 14 due to lack of historical exercise data). On March 4, 2019, the Company issued options to purchase 240,540 of the Company’s shares of common stock to certain individuals with an exercise price of $8.39 per share. One third of the options become exercisable on each of the first three anniversaries of March 4, 2019, with accelerated vesting that may occur following 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 $3.76 per share, or $904 in the aggregate. The assumptions used in the Black-Scholes-Merton option pricing formula are as follows: volatility of 55.23% (representing the Company’s historical volatility), a risk-free interest rate of 2.49%, a dividend yield of 0%, and expected life of 4.00 years (determined using the simplified method as outlined in SAB Topic 14 due to lack of historical exercise data). For the three and nine months ended September 30, 2019 and 2018, 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 |  | For the Nine Months Ended |
|  | September 30, |  | September 30, |
|  | 2019 |  | 2018 |  | 2019 |  | 2018 |
General and administrative expenses |  | $ | 232 |  | $ | 216 |  | $ | 642 |  | $ | 553 |
Amortization of the unamortized stock-based compensation balance of $798 as of September 30, 2019 is expected to be expensed $208, $431, $142 and $17 during the remainder of 2019 and during the years ended December 31, 2020, 2021 and 2022, respectively. The following table summarizes the unvested option activity for the nine months ended September 30, 2019:
|  | Number of |  | Average Exercise |  | Average Fair |  |  |
|  | Options |  | Price |  | Value |  |  |
Outstanding at January 1, 2019 - Unvested |  | 166,942 |  | $ | 13.01 |  | $ | 7.25 |  |  |
Granted |  | 240,540 |  |  | 8.39 |  |  | 3.76 |  |  |
Exercisable |  | (40,869) |  |  | 13.69 |  |  | 7.55 |  |  |
Exercised |  | — |  |  | — |  |  | — |  |  |
Forfeited |  | — |  |  | — |  |  | — |  |  |
Outstanding at September 30, 2019 - Unvested |  | 366,613 |  | $ | 9.90 |  | $ | 4.93 |  |  |
The following table summarizes certain information about the options outstanding as of September 30, 2019
|  |  | Options Outstanding and Unvested, |  | Options Outstanding and Exercisable, |
|  |  | September 30, 2019 |  | September 30, 2019 |
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 |  | Options |  | Price |  | Life |
$ | 10.43 |  | 366,613 |  | $ | 9.90 |  | 4.97 |  | 129,535 |  | $ | 11.94 |  | 2.87 |
As of September 30, 2019 and December 31, 2018, a total of 496,148 and 255,608 stock options were outstanding, respectively. Restricted Stock Units The Company has issued restricted stock units (“RSUs”) under the 2015 Plan to certain members of the Board of Directors and certain executives and employees of the Company, 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 September 30, 2019 and December 31, 2018, 228,781 and 216,304 shares of the Company’s common stock were outstanding in respect of the RSUs, respectively. Such shares of common stock 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 of common stock will only be issued to executives and employees when their RSUs vest under the terms of their grant agreements 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 other individuals vest ratably on each of the three anniversaries of the determined vesting date. The table below summarizes the Company’s unvested RSUs for the nine months ended September 30, 2019:
|  |  |  | Weighted |
|  | Number of |  | Average Grant |
|  | RSUs |  | Date Price |
Outstanding at January 1, 2019 |  | 149,170 |  | $ | 12.42 |
Granted |  | 135,659 |  |  | 8.44 |
Vested |  | (26,745) |  |  | 15.92 |
Forfeited |  | — |  |  | — |
Outstanding at September 30, 2019 |  | 258,084 |  | $ | 9.96 |
The total fair value of the RSUs that vested during the nine months ended September 30, 2019 and 2018 was $230 and $450, 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. The following table summarizes certain information of the RSUs unvested and vested as of September 30, 2019:
Unvested RSUs |  | Vested RSUs |
September 30, 2019 |  | September 30, 2019 |
|  |  |  | Weighted |  |  |  |  |
|  | Weighted |  | Average |  |  |  | Weighted |
|  | Average |  | Remaining |  |  |  | Average |
Number of |  | Grant Date |  | Contractual |  | Number of |  | Grant Date |
RSUs |  | Price |  | Life |  | RSUs |  | Price |
258,084 |  | $ | 9.96 |  | 1.22 |  | 320,980 |  | $ | 11.59 |
The Company is amortizing these grants over the applicable vesting periods, net of anticipated forfeitures. As of September 30, 2019, unrecognized compensation cost of $866 related to RSUs will be recognized over a weighted-average period of 1.22 years. For the three and nine months ended September 30, 2019 and 2018, 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 |  | For the Nine Months Ended |
|  | September 30, |  | September 30, |
|  | 2019 |  | 2018 |  | 2019 |  | 2018 |
General and administrative expenses |  | $ | 343 |  | $ | 425 |  | $ | 954 |  | $ | 1,213 |
Restricted Stock Under the 2015 Plan, grants of restricted common stock issued to executives ordinarily vest ratably on each of the three anniversaries of the determined vesting date. As of September 30, 2019, all restricted stock awards under the 2015 Plan were vested. There were no shares that vested under the 2015 Plan during the nine months ended September 30, 2019 and 2018. 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 and nine months ended September 30, 2019 and 2018, 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 |  | For the Nine Months Ended |
| September 30, |  | September 30, |
| 2019 |  | 2018 |  | 2019 |  | 2018 |
General and administrative expenses | $ | — |  | $ | 3 |  | $ | — |  | $ | 10 |
The Company amortized these grants over the applicable vesting periods, net of anticipated forfeitures. As of September 30, 2019, there was no unrecognized compensation cost.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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