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, non-statutory stock options, stock appreciation rights, restricted stock awards, 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, 2020, 390,489 shares remained available for grant under the 2016 Plan.

All remaining outstanding awards granted under the 2004 Plan have vested during the year ended June 30, 2020.

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 typically 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.

In July 2019, the new chief executive officer upon his employment received 48,872 shares of serviced-based restricted common stock which vest in three equal amounts on June 30, 2020, 2021 and 2022. He was also awarded a total of 200,000 market-based restricted stock units consisting of four equal tranches, each of which may vest only if its respective stock price requirement is met before the award term expires. Each tranche has a separate stated price requirement and respective vesting will occur only if, before July 1, 2023, the ninety-day trailing average Company stock share price equals or exceeds its tranche price requirement.

During the year ended June 30, 2020, we also granted 52,119 service-based and 104,236 market-based Restricted Stock awards to our employees as well as 56,395 service-based awards to the Company's directors.

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.

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, 2020, there were no performance-based awards outstanding.

Market-based awards vest if their respective two- or three-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 years ended June 30, 2020 and 2019 were:



	Year Ended June 30,
	2020		2019
Weighted average fair value of market-based awards granted	$	3.79	$	8.24
Risk-free interest rate	1.65% to 1.87%		2.69		%
Expected life in years	1.35 to 2.56		2.82
Expected volatility	38.6% to 43.7%		41.8		%
Dividend yield	6% to 7.2%		4.0		%

Unvested Restricted Stock awards at June 30, 2020 consisted of the following:



Award Type	Number of Restricted Shares	Weighted Average Grant-Date Fair Value
Service-based awards	155,318	$	5.88
Market-based awards	129,710	5.10
Unvested at June 30, 2020	285,028	$	5.53

The following table sets forth the Restricted Stock transactions for the year ended June 30, 2020:



	Number of Restricted Shares		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at June 30, 2020		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2019	176,683		$	8.09	$	—
Service-based shares granted	157,386		5.73
Market-based shares granted	104,236		4.34
Vested	(104,159	)	7.19
Forfeited	(49,118	)	9.35
Unvested at June 30, 2020	285,028		$	5.53	$	1,001,477	1.74

The following is a summary of Restricted Stock that vested during the last two fiscal years:



	Year Ended June 30,
	2020		2019
Vesting-date intrinsic value of Restricted Stock	$	477,647	$	1,141,631
Grant-date fair value of vested Restricted Stock	$	748,893	$	909,678
Number of awards that vested	104,159		133,776

The following table summarizes Contingent Restricted Stock activity for the year ended June 30, 2020:



	Number of Restricted Stock Units		Weighted Average Grant-Date Fair Value		Unamortized Compensation Expense at June 30, 2020		Weighted Average Remaining Amortization Period (Years)
Unvested at July 1, 2019	10,156		$	3.42
Market-based awards granted	200,000		3.50
Vested	(10,156	)	3.42
Unvested at June 30, 2020	200,000		$	3.50	$	156,591	0.52

All of these outstanding awards at June 30, 2020 are market-based awards.

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



	Year Ended June 30,
	2020		2019
Vest-date intrinsic value of Contingent Restricted Stock	$	60,225	$	105,227
Grant-date fair value of vested Contingent Restricted Stock	$	34,734	$	60,266
Number of awards that vested	10,156		10,629

Stock-based Compensation Expense

For the years ended June 30, 2020, and 2019, we recognized stock-based compensation expense related to Restricted Stock and Contingent Restricted Stock grants of $1,285,663 and $888,162, respectively.