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Note 11 - Share-based Compensation

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

11. Share-based compensation

On June 8, 2022, the stockholders of the Company approved the Fluent, Inc. 2022 Omnibus Equity Incentive Plan (the "2022 Plan") that authorized for issuance 15,422,523 shares of the Company's common stock, which became effective on August 10, 2022 (“Effective Date”). With the 2022 Plan, no further awards are available to be issued under the 2018 Stock Incentive Plan (the “Prior Plan”), but all awards under the Prior Plans that are 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. As of December 31, 2022, the Company had 15,422,523 shares of common stock available for grants pursuant to the 2022 Plan, which included 919,517 shares of common stock previously available for issuance under the Fluent Inc. 2018 Stock Incentive Plan (the "Prior Plan").

The primary purpose of the Company's stock compensation plan is to attract, retain, reward, and motivate certain individuals by providing them with opportunities to acquire or increase their ownership interests in the Company. In October 2022, the Company issued to certain of its senior officers and employees, restricted stock units (“RSUs”) (time-based), long-term incentive grants (performance and time-based vesting RSUs), or performance stock units (“PSUs”) (on achievement of targets, a cash payout) under the 2022 Plan.

Stock options

The Compensation Committee of the Company's Board of Directors approved the grant of stock options to certain Company officers, which were issued on February 1, 2019, December 20, 2019, March 1, 2020, and March 1, 2021, respectively, 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%, 133.33%, 133.3% and 133.33%, respectively, of the exercise prices 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 prices for twenty consecutive trading days; provided, that no shares will vest prior to the first anniversary of the grant date. As of December 31, 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 years ended December 31, 2022 and 2021, the activity related to stock options consisted of the following:

		*Number of options*				*Weighted average exercise price per share*				*Weighted average remaining contractual term (years)*				*Aggregate intrinsic value*
Outstanding as of December 31, 2020			2,294,000			$	4.34				8.0			$	2,256
Granted			108,000			$	6.33				9.7				—
Forfeited			—
Expired			(198,000	)
Outstanding as of December 31, 2021			2,204,000			$	4.41				7.1				—
Granted			—
Forfeited			—
Exercised			(65,000	)			1.10
Outstanding as of December 31, 2022			2,139,000			$	4.37				6.3				—
Options exercisable as of December 31, 2022			1,242,000			$	3.98				6.3				—

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 years ended December 31, 2022 and 2021, the unvested balance of stock options was as follows:

		*Number of options*				*Weighted average exercise price per share*				*Weighted average remaining contractual term (years)*
Unvested as of December 31, 2021			897,000			$	4.91				7.3
Granted			—
Forfeited			—
Vested			—
Unvested as of December 31, 2022			897,000			$	4.91			$	6.3

For the years ended December 31, 2022 and 2021, compensation expense recognized for stock options of $125 and $499, respectively was recognized in sales and marketing, product development and general and administrative expenses in the consolidated statement of operations. As of December 31, 2022, there was $0 of unrecognized share-based compensation with respect to outstanding stock options.

Restricted stock units and restricted stock

For the years ended December 31, 2022 and 2021, details of unvested restricted stock units ("RSUs") and restricted stock activity were as follows:

						*Weighted average*
		*Number of units*				*grant date fair value*
Unvested as of December 31, 2020			3,377,097			$	7.09
Granted			2,036,561			$	4.24
Vested and delivered			(2,417,986	)		$	2.90
Withheld as treasury stock ⁽¹⁾			(145,956	)		$	4.65
Vested not delivered ⁽²⁾			570,335			$	2.70
Forfeited			(308,730	)		$	4.57
Unvested as of December 31, 2021			3,111,321			$	8.03
Granted			2,864,701			$	1.44
Vested and delivered			(1,120,046	)		$	3.55
Withheld as treasury stock ⁽¹⁾			(208,329	)		$	4.56
Vested not delivered ⁽²⁾			—			$	3.30
Forfeited			(424,491	)		$	3.53
Unvested as of December 31, 2022			4,223,156			$	5.37

(1)

As discussed in Note 10, Common stock, treasury stock and warrants, the increase in treasury stock was primarily attributable to shares withheld to cover statutory withholding taxes upon the vesting of RSUs. As of December 31, 2022 and 2021, there were 4,300,152 and 4,091,823 outstanding shares of treasury stock, respectively.

(2)

Vested not delivered represents vested RSUs with delivery deferred to a future time. During the year ended December 31, 2022, there was no net change in vested not delivered balance as a result of the timing of delivery of certain shares. During the year ended December 31, 2021, there was a net decrease of 570,335 shares included in vested not delivered balance as a result of the delivery of 650,333 shares, partially offset by the vesting of 79,998 shares with deferred delivery election. As of December 31, 2022 and 2021, there were 1,691,666 and 1,691,666 outstanding RSUs included in vested not delivered, respectively.

For the years ended December 31, 2022 and 2021, the Company recognized compensation expense for RSUs of $3,989 and $4,379, respectively, in sales and marketing, product development and general and administrative in the consolidated statements of operations, and intangible assets in the consolidated balance sheets. As of December 31, 2022, there was $6,367 of unrecognized share-based compensation with respect to outstanding RSUs and restricted stock. 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 December 31, 2022, unrecognized share-based compensation expense associated with the granted RSUs, restricted stock and stock options is $6,367, which is expected to be recognized over a weighted average period of 1.9 years. For the years ended December 31, 2022 and 2021, share-based compensation for the Company’s equity awards were allocated to the following lines in the consolidated financial statements:

		*Year Ended December 31,*
(In thousands)		*2022*				*2021*
Sales and marketing		$	600			$	763
Product development			556				879
General and administrative			2,861				3,119
Share-based compensation expense			4,017				4,761
Capitalized in intangible assets			97				117
Total share-based compensation		$	4,114			$	4,878

401(k) Profit Sharing Plan and Trust Plan

The Company maintains a 401(k) Profit Sharing Plan and Trust (“Plan”) covering all U.S. employees. Under the Plan, the Company makes a safe harbor matching contribution equal to 100% of an employee’s salary deferrals that do not exceed 3% of the employee’s compensation plus 50% of the employee’s salary deferrals between 3% and 5% of such employee’s compensation. This safe harbor matching contribution is 100% vested. During 2022, we made matching contributions to the Plan of $916. During 2021, we made matching contributions to the Plan of $729.

The Company also has a discretion to award eligible employees under the Plan, profit sharing contributions