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Note 8 - Share-based Compensation

6 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

8. Share-based compensation

As of June 30, 2022, the Company maintained two share-based incentive plans: the Cogint, Inc. 2015 Stock Incentive Plan (the "2015 Plan") and the Fluent, Inc. 2018 Stock Incentive Plan (the "2018 Plan") which, combined, authorize the issuance of 21,484,593 shares of common stock. On June 8, 2022 (the "Effective Date"), the stockholders of the Company approved the Fluent, Inc. 2022 Omnibus Equity Incentive Plan (the "2022 Plan"). The 2022 Plan has 10,909,251 shares of common stock reserved for issuance including 909,251 shares of common stock that were carried over from the 2018 Plan. No further awards may be issued under the 2015 Plan or the 2018 Plan (together, the "Prior Plans"). All awards under the Prior Plans that were outstanding as of the Effective Date will continue to be governed by the terms, conditions and procedures set forth in the Prior Plans and any applicable award agreement. The primary purpose of the plans is to attract, retain, reward, and motivate certain individuals by providing them with opportunities to acquire or increase their ownership interests in the Company.

Stock options

The Compensation Committee of the Company's Board of Directors approved the grant of stock options to certain Company executives, which were issued on February 1, 2019, December 20, 2019, March 1, 2020, and March 1, 2021, under the 2018 Plan. Subject to continuing service, 50% of the shares subject to these stock options will vest if the Company's stock price remains above 125.00%, 133.33%, 133.33% and 133.33%, respectively, of the exercise price for twenty consecutive trading days, and the remaining 50% of the shares subject to these stock options will vest if the Company's stock price remains above 156.25%, 177.78%, 177.78% and 177.78%, respectively, of the exercise price for twenty consecutive trading days; provided, that no shares will vest prior to the first anniversary of the grant date. As of June 30, 2022, the first condition for the stock options issued on February 1, 2019, December 20, 2019 and March 1, 2020 had been met and the second condition for the stock options issued on December 20, 2019 and March 1, 2020 had been met. Any shares that remain unvested as of the fifth anniversary of the grant date will vest in full on such date. The fair value of the stock options granted was estimated at the trading day before the date of grant using a Monte Carlo simulation model. The key assumptions utilized to calculate the grant-date fair values for these awards are summarized below:

Issuance Date		February 1, 2019				December 20, 2019				March 1, 2020				March 1, 2021
Fair value lower range		$	2.81			$	1.58			$	1.46			$	4.34
Fair value higher range		$	2.86			$	1.61			$	1.49			$	4.43
Exercise price		$	4.72			$	2.56			$	2.33			$	6.33
Expected term (in years)			1.0 - 1.3				1.0 - 1.6				1.0 - 1.5				1.0 - 1.3
Expected volatility			65	%			70	%			70	%			80	%
Dividend yield			—	%			—	%			—	%			—	%
Risk-free rate			2.61	%			1.85	%			1.05	%			1.18	%

For the six months ended June 30, 2022, details of stock option activity were as follows:

		*Number of options*				*Weighted average exercise price per share*				*Weighted average remaining contractual term (in years)*				*Aggregate intrinsic value*
Outstanding as of December 31, 2021			2,204,000			$	4.41				7.1			$	—
Granted			—				—				—				—
Exercised			—				—				—				—
Expired			(65,000	)			1.10				—				—
Outstanding as of June 30, 2022			2,139,000			$	4.37				6.8			$	—
Options exercisable as of June 30, 2022			1,242,000			$	3.98				6.8			$	—

The aggregate intrinsic value amounts in the table above represent the difference between the closing price of the Company's common stock at the end of the reporting period and the corresponding exercise prices, multiplied by the number of in-the-money stock options as of the same date.

For the six months ended June 30, 2022, the unvested balance of options was as follows:

		*Number of options*				*Weighted average exercise price per share*				*Weighted average remaining contractual term (in years)*
Unvested as of December 31, 2021			897,000			$	4.91				7.3
Granted			—				—				—
Vested			—				—				—
Unvested as of June 30, 2022			897,000			$	4.91				6.8

Compensation expense recognized for stock options of $20 and $123 for the three months ended June 30, 2022 and 2021, respectively, and $125 and $290 for the six months ended June 30, 2022 and 2021, respectively, was recorded in sales and marketing, product development and general and administrative expenses in the consolidated statements of operations. As of June 30, 2022, there was $20 of unrecognized share-based compensation with respect to outstanding stock options.

Restricted stock units and restricted stock

For the six months ended June 30, 2022, details of unvested RSU and restricted stock activity were as follows:

		*Number of units*				*Weighted average grant-date fair value*
Unvested as of December 31, 2021			3,111,321			$	8.03
Granted			200,000			$	1.89
Vested and delivered			(880,670	)		$	3.85
Withheld as treasury stock ⁽¹⁾			(208,329	)		$	4.56
Vested not delivered ⁽²⁾			(17,206	)		$	3.35
Forfeited			(330,116	)		$	3.72
Unvested as of June 30, 2022			1,875,000			$	10.53

(1)

As discussed in Note 7, Common stock, treasury stock and warrants, the increase in treasury stock was due to shares withheld to cover statutory withholding taxes upon the delivery of shares following vesting of RSUs. As of June 30, 2022, there were 4,300,152 outstanding shares of treasury stock.

(2)

Vested not delivered represents vested RSUs with delivery deferred to a future time. For the six months ended June 30, 2022, there was a net increase of 17,206 shares included in the vested not delivered balance as a result of the timing of delivery of certain shares. As of June 30, 2022, 1,708,872 outstanding RSUs were vested not delivered.

Compensation expense recognized for RSUs and restricted stock of $867 and $1,108 for the three months ended June 30, 2022 and 2021, respectively, and $1,777 and $2,213 for the six months ended June 30, 2022 and 2021, respectively, was recorded in sales and marketing, product development and general and administrative in the consolidated statements of operations, and intangible assets, net in the consolidated balance sheets. The fair value of the RSUs and restricted stock was estimated using the closing prices of the Company's common stock on the dates of grant.

As of June 30, 2022, unrecognized share-based compensation expense associated with the granted RSUs and stock options amounted to $5,109, which is expected to be recognized over a weighted average period of 1.6 years.

For the three and six months ended June 30, 2022 and 2021, share-based compensation for the Company's stock options, RSUs, common stock and restricted stock awards were allocated to the following accounts in the consolidated financial statements:

		*Three Months Ended June 30,*								*Six Months Ended June 30,*
		*2022*				*2021*				*2022*				*2021*
Sales and marketing		$	143			$	209			$	313			$	372
Product development			98				233				258				501
General and administrative			622				759				1,280				1,559
Share-based compensation expense			863				1,201				1,851				2,432
Capitalized in intangible assets			24				30				51				71
Total share-based compensation		$	887			$	1,231			$	1,902			$	2,503