Stock-Based Incentive Plan

At the December 8, 2016 annual meeting, the stockholders approved the adoption of the Evolution Petroleum Corporation 2016 Equity Incentive Plan (the “2016 Plan”), which replaced the Evolution Petroleum Corporation Amended and Restated 2004 Stock Plan (the "2004 Plan"). The 2016 Plan authorizes the issuance of 1,100,000 shares of common stock prior to its expiration on December 8, 2026. Incentives under the 2016 Plan may be granted to employees, directors and consultants of the Company in any one or a combination of the following forms: incentive stock options and non-statutory stock options, stock appreciation rights, restricted stock awards and restricted stock unit awards, performance share awards, performance cash awards, and other forms of incentives valued in whole or in part by reference to, or otherwise based on, our common stock, including its appreciation in value. As of June 30, 2019, 852,111 shares remained available for grant under the 2016 Plan.

All outstanding awards granted under the 2004 Plan continue to be subject to the terms and conditions as set forth in the agreements evidencing such awards and the terms of the 2004 Plan. Under these agreements, we have outstanding grants of restricted common stock awards ("Restricted Stock") and contingent restricted common stock awards ("Contingent Restricted Stock") to employees and directors of the Company.

Restricted Stock and Contingent Restricted Stock

The Company may award grants of both Restricted Stock and Contingent Restricted Stock as part of its long-term incentive plan. Such grants, which expire after a maximum of four years if unvested, contain service-based, performance-based and market-based vesting provisions. The common shares underlying the Restricted Stock grants are issued on the date of grant. Contingent Restricted Stock grants vest only upon the attainment of higher performance-based or market-based vesting thresholds and are issued only upon vesting. Shares underlying Contingent Restricted Stock awards are reserved from the Plan under which they were granted under.

Service-based awards vest with continuous employment by the Company, generally in annual installments over a three or four-year period. Certain awards may contain other vesting periods, including quarterly installments and one-year vesting. Restricted Stock grants which vest based on service are valued at the fair market value on the date of grant and amortized over the service period. During the year ended June 30, 2019, we granted 31,777 service-based Restricted Stock awards and 43,990 market-based awards to employees and 35,215 service-based awards to directors, which have a one-year vesting period. We did not grant any performance-based nor any Contingent Restricted Stock awards, during this fiscal year.

Performance-based grants vest upon the attainment of earnings, revenue and other operational goals and require that the recipient remain an employee or director of the Company through the vesting date. The Company recognizes compensation expense for performance-based awards ratably over the expected vesting period based on the grant date fair value when it is deemed probable, for accounting purposes, that the performance criteria will be achieved. The expected vesting period may be deemed to be shorter than the term of the award. As of June 30, 2019, there were no performance-based awards outstanding.

Market-based awards vest if their respective 2- or 3-year trailing total returns on the Company’s common stock exceed the corresponding total returns of various quartiles of indices consisting of either peer companies or a broad market index of companies in our industry. More recent market-based awards vest if the average of the Company's closing stock prices over defined quarterly measurement periods together with accumulated paid dividends exceeds a defined value. The fair values and expected vesting periods of these awards are determined using a Monte Carlo simulation based on the historical volatility of the Company's total return compared to the historical volatilities of the other companies in the index. Compensation expense for market-based awards is recognized over the expected vesting period using the straight-line method, so long as the holder remains an employee or director of the Company. Total compensation expense is based on the fair value of the awards at the date of grant and is independent of vesting or expiration of the awards, except for termination of service.

Assumptions used in the Monte Carlo simulation valuations for the year ended June 30, 2019 follow below. There were no market-based awards granted for the year ended June 30, 2018.



	Year Ended June 30,
	2019
Weighted average fair value of market-based awards granted	$	8.24
Risk-free interest rate	2.69		%
Expected life in years	2.82
Expected volatility	41.8		%
Dividend yield	4.0		%

Unvested Restricted Stock awards at June 30, 2019 consisted of the following:



Award Type	Number of Restricted Shares	Weighted Average Grant-Date Fair Value
Service-based awards	112,381	$	8.52
Market-based awards	64,302	7.35
Unvested at June 30, 2019	176,683	$	8.09

The following table sets forth the Restricted Stock transactions for the year ended June 30, 2019:



	Number of Restricted Shares		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at June 30, 2019		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2018	199,477		$	6.83	$	—
Service-based awards granted	66,992		9.17
Market-based awards granted	43,990		8.24
Vested	(133,776	)	6.80
Unvested at June 30, 2019	176,683		$	8.09	$	848,262	1.75

The following is a summary of Restricted Stock vestings for the last two fiscal years:



	Year Ended June 30,
	2019		2018
Vesting-date intrinsic value of Restricted Stock	$	1,141,631	$	1,622,937
Grant-date fair value of vested Restricted Stock	$	909,678	$	1,427,498
Number of awards vesting	133,776		211,960

The following table summarizes Contingent Restricted Stock activity for fiscal 2019:



	Number of Restricted Stock Units		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at June 30, 2019		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2018	28,562		$	6.06
Expired	(7,777	)	10.05
Vested	(10,629	)	5.67
Unvested at June 30, 2019	10,156		$	3.42	$	—	0

All of these outstanding awards at June 30, 2019 are market-based awards.

The following is a summary of Contingent Restricted Stock vestings for the last two fiscal years:



	Year Ended June 30,
	2019		2018
Vest-date intrinsic value of Contingent Restricted Stock	$	105,227	$	347,852
Grant-date fair value of vested Contingent Restricted Stock	$	60,266	$	155,744
Number of awards vesting	10,629		46,630

Stock-based Compensation Expense

For the years ended June 30, 2019, and 2018, we recognized stock-based compensation expense related to Restricted Stock and Contingent Restricted Stock grants of $888,162 and $1,366,764.