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EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN AND 401(K) | 12 Months Ended
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Dec. 31, 2024
EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN AND 401(k) |
EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN AND 401(K) | NOTE 12 — EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN, AND 401(K) Compensation expense charged against income for share-based awards during the years ended December 31, 2024, 2023, and 2022 is shown in the table below. These amounts are included in General and administrative expense in the Statements of Operations.
| For the years ended December 31,
| 2024 |  | 2023 |  | 2022
Share-based compensation expense from: |  |  |  |  |
Employee stock options | $ | — |  |  | $ | — |  |  | $ | — |
Restricted stock unit grants | 3,544,748 |  |  | 4,537,026 |  |  | 4,148,639 |
Performance stock unit awards | 1,961,269 |  |  | 4,296,399 |  |  | 3,013,592 |
Total share-based compensation | $ | 5,506,017 |  |  | $ | 8,833,425 |  |  | $ | 7,162,231 |
In 2011, the Board of Directors (the "Board") of the Company approved and adopted a long-term incentive plan (the “2011 Plan”), which was subsequently approved and amended by the shareholders. As of December 31, 2024, there were no shares available for future grants under the 2011 Plan. In 2021, the Board and Company shareholders approved and adopted the Ring Energy, Inc. 2021 Omnibus Incentive Plan (the “2021 Plan”). The 2021 Plan provides that the Company may grant options, stock appreciation rights, restricted shares, restricted stock units, performance-based awards, other share-based awards, other cash-based awards, or any combination of the foregoing. At the 2023 Annual Meeting, the shareholders approved an amendment to the 2021 Plan to increase the number of shares available under the 2021 Plan by 6.0 million. As of December 31, 2024, there were 5,317,129 shares available for grant under the 2021 Plan. Employee Stock Options – No stock options were granted in the years ended December 31, 2024, 2023, or 2022. All outstanding stock option awards vest at the rate of 20% each year over five years beginning one year from the date granted and expire ten years from the grant date. A summary of the status of the stock options as of December 31, 2024, 2023, and 2022 and changes during the years ended December 31, 2024, 2023, and 2022 is as follows:
| 2024 |  | 2023 |  | 2022
| Options |  | Weighted- Average Exercise Price |  | Options |  | Weighted- Average Exercise Price |  | Options |  | Weighted- Average Exercise Price
Outstanding at beginning of year | 70,500 |  | $ | 10.33 |  |  | 265,500 |  | $ | 4.21 |  |  | 365,500 |  | $ | 3.61 |
Granted | — |  | — |  |  | — |  | — |  |  | — |  | — |
Forfeited | — |  | — |  |  | — |  | — |  |  | — |  | — |
Expired | (5,000) |  | 5.50 |  |  | (195,000) |  | 2.00 |  |  | — |  | — |
Exercised | — |  | — |  |  | — |  | — |  |  | (100,000) |  | 2.00 |
Outstanding at end of year | 65,500 |  | $ | 10.70 |  |  | 70,500 |  | $ | 10.33 |  |  | 265,500 |  | $ | 4.21 |
Exercisable at end of year | 65,500 |  | $ | 10.70 |  |  | 70,500 |  | $ | 10.33 |  |  | 265,500 |  | $ | 4.21 |
As of December 31, 2024, the Company had $0 of unrecognized compensation cost related to stock options. The aggregate intrinsic value of options vested and expected to vest as of December 31, 2024 was $0. The aggregate intrinsic value of options exercisable at December 31, 2024 was $0. The year-end intrinsic values are based on a December 31, 2024 closing stock price of $1.36. No stock options were exercised during 2024 or 2023. Stock options exercised of 100,000 shares in 2022 had an aggregate intrinsic value on the date of exercise of $221,000. The following table summarizes information related to the Company’s stock options outstanding as of December 31, 2024:
|  | Options Outstanding |  |
Exercise price |  | Number Outstanding |  | Weighted- Average Remaining Contractual Life (in years) |  | Number Exercisable
14.54 |  |  | 10,000 |  | 0.73 |  | 10,000
8.00 |  |  | 4,500 |  | 0.92 |  | 4,500
6.42 |  |  | 15,000 |  | 1.34 |  | 15,000
11.75 |  |  | 36,000 |  | 1.95 |  | 36,000
$ | 10.70 |  |  | 65,500 |  | 1.55 |  | 65,500
Restricted stock unit grants – Following is a table reflecting the restricted stock unit grants during 2024, 2023 and 2022:
Grant date |  | # of restricted stock units
February 9, 2022 |  | 1,247,061
April 13, 2022 |  | 7,143
May 10, 2022 |  | 10,349
June 16, 2022 |  | 2,150
July 14, 2022 |  | 8,547
August 29, 2022 |  | 30,581
September 1, 2022 |  | 37,797
September 19, 2022 |  | 49,645
February 16, 2023 |  | 2,270,842
February 13, 2024 |  | 2,647,970
April 5, 2024 |  | 60,000
July 31, 2024 |  | 76,600
December 9, 2024 |  | 83,000
Restricted stock unit grants issued prior to 2020 vest at the rate of 20% each year over five years beginning one year from the date granted. Restricted stock unit grants issued during 2020 and in following years vest at a rate of 33% each year over three years beginning one year from the date granted for all employees. Restricted stock unit awards granted to members of the Board generally vest on the first anniversary of the grant date. The Company accrues for estimated forfeitures in share-based compensation by an annual factor of 3%. For forfeited awards, in the period of occurrence, the reduction in expense is booked as an incremental reduction to share-based compensation. For non-forfeited awards, in the final period of expense, the incremental remaining expense is recognized. A summary of the status of restricted stock unit grants and changes during the years ended December 31, 2024, 2023 and 2022 is as follows:
| 2024 |  | 2023 |  | 2022
| Restricted Stock Units |  | Weighted- Average Grant Date Fair Value |  | Restricted Stock Units |  | Weighted- Average Grant Date Fair Value |  | Restricted Stock Units |  | Weighted- Average Grant Date Fair Value
Outstanding at beginning of year | 3,148,226 |  | $ | 2.40 |  |  | 2,623,790 |  | $ | 2.29 |  |  | 2,572,596 |  | $ | 1.75 |
Granted | 2,867,570 |  | 1.34 |  |  | 2,270,842 |  | 2.22 |  |  | 1,393,273 |  | 2.83 |
Forfeited or rescinded | (510,351) |  | 1.61 |  |  | (66,174) |  | 2.22 |  |  | (31,185) |  | 2.83 |
Vested | (1,688,317) |  | 2.43 |  |  | (1,680,232) |  | 1.99 |  |  | (1,310,894) |  | 1.79 |
Outstanding at end of year | 3,817,128 |  | $ | 1.70 |  |  | 3,148,226 |  | $ | 2.40 |  |  | 2,623,790 |  | $ | 2.29 |
As of December 31, 2024, the Company had $2,247,371 of unrecognized compensation cost related to restricted stock unit grants that will be recognized over a weighted average period of 1.76 years. During 2024, 2023, and 2022, 1,688,317, 1,680,232, and 1,310,894 restricted stock units vested, respectively. At the dates of vesting those restricted stock units had an aggregate intrinsic value of $2,439,773, $3,203,568, and $3,807,996, respectively. Performance Stock Units - In accordance with the 2021 Plan, upon Board approval, the Company entered into performance stock unit (“PSU”) agreements (the “PSU Agreement”) with certain employees. The PSUs are performance-based restricted stock units subject to the terms of the 2021 Plan and the PSU Agreement. On November 22, 2021, the Company granted a total of 860,216 PSUs to the Company’s five executive officers (the “2021 PSU Awards”). The performance period for the 2021 PSU Awards began on January 1, 2021, and ended on December 31, 2023. Based on the achievement of the performance goals for the 2021 PSU Awards, a total of 1,170,024 PSUs vested on December 31, 2023. On February 9, 2022, the Company granted a total of 860,216 PSUs to the Company's five executive officers (the "2022 PSU Awards"). The performance period for the 2022 PSU Awards began on January 1, 2022, and ended on December 31, 2024. In July 2024, two of the executive officers separated from the Company, forfeiting 215,054 of these PSUs. Based on the achievement of the performance goals for the 2022 PSU Awards, a total of 571,324 PSUs vested on December 31, 2024. On February 16, 2023, the Company granted a total of 1,162,162 PSUs to the Company's five executive officers (the "2023 PSU Awards"). The performance period for the 2023 PSU Awards began on January 1, 2023, and will end on December 31, 2025. In July 2024, two of the aforementioned executive officers separated from the Company, forfeiting 270,270 of these PSUs. On April 30, 2024, the Company granted a total of 1,378,378 PSUs to the Company's five executive officers (the "2024 PSU Awards"). The performance period for the 2024 PSU Awards began on January 1, 2024, and will end on December 31, 2026. In July 2024, two of the aforementioned executive officers separated from the Company, forfeiting 378,378 of these PSUs. A summary of the status of the PSU awards and changes during the years ended December 31, 2024, 2023 and 2022 are as follows:
|  | 2024 |  | 2023 |  | 2022
|  | Performance Stock Units |  | Weighted- Average Grant Date Fair Value |  | Performance Stock Units |  | Weighted- Average Grant Date Fair Value |  | Performance Stock Units |  | Weighted- Average Grant Date Fair Value
Outstanding at beginning of year |  | 2,022,378 |  | $ | 3.11 |  |  | 1,720,432 |  | $ | 3.76 |  |  | 860,216 |  | $ | 3.87 |
Granted |  | 1,378,378 |  | 2.27 |  |  | 1,162,162 |  | 2.71 |  |  | 860,216 |  | 3.65 |
Incremental performance stock units vested |  | 248,742 |  | — |  |  | 309,808 |  | — |  |  | — |  | — |
Forfeited, cancelled or rescinded |  | (1,186,282) |  |  | 2.38 |  |  | — |  | — |  |  | — |  | — |
Vested |  | (571,324) |  |  | 2.79 |  | (1,170,024) |  |  | 3.66 |  |  | — |  | — |
Outstanding at end of year |  | 1,891,892 |  | $ | 2.47 |  |  | 2,022,378 |  | $ | 3.11 |  |  | 1,720,432 |  | $ | 3.76 |
The Company accrues for estimated forfeitures in share-based compensation by an annual factor of 3%. For forfeited awards, in the period of occurrence, the reduction in expense is booked as an incremental reduction to share-based compensation. For non-forfeited awards, in the final period of expense, the incremental remaining expense is recognized. As of December 31, 2024, the Company had $3,088,198 of unrecognized compensation cost related to the PSU Awards that will be recognized over a weighted average period of 1.60 years. During 2024, 571,324 PSUs vested. At the dates of vesting those PSUs had an aggregate intrinsic value of $877,420. 401(k) Plan - In 2019, the Company initiated a sponsored 401(k) plan that is a defined contribution plan for the benefit of all eligible employees. The plan allows eligible employees, after a three-month waiting period, to make pre-tax or after-tax contributions, not to exceed annual limits established by the federal government. The Company makes matching contributions of up to 6% of any employee’s compensation. Employees are 100% vested in the employer contribution upon receipt. The following table presents the matching contributions expense recognized for the Company’s 401(k) plan for the years ended December 31, 2024, 2023, and 2022:
| 2024 |  | 2023 |  | 2022
Employer safe harbor match | $ | 455,641 |  |  | $ | 346,268 |  |  | $ | 284,094 |

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