Fluent, Inc. Stock Compensation Disclosure
12. 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 2,570,421 shares of the Company's common stock. As of December 31, 2024, the Company had 665,767 shares of common stock available for grants pursuant to the 2022 Plan, which included 262,517 shares of common stock previously available for issuance under the 2018 Stock Incentive Plan.
The primary purpose of the 2022 Plan and prior 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. 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. 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, 2024, 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 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 | $ | 16.86 | $ | 9.48 | $ | 8.76 | $ | 26.04 | ||||||||
| Fair value higher range | $ | 17.16 | $ | 9.66 | $ | 8.94 | $ | 26.58 | ||||||||
| Exercise price | $ | 28.32 | $ | 15.36 | $ | 13.98 | $ | 37.98 | ||||||||
| 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 | % | ||||||||
On September 9, 2024, the Compensation Committee of the Company's Board of Directors approved the grant of stock options to the Company's Chief Financial Officer in connection with his employment agreement. Subject to continuing service, 50% of the shares subject to these stock options will vest when the average closing price of the Company's common stock is equal to three times the exercise price of the option for ten consecutive trading days, and the remaining 50% of the shares subject to these stock options will vest when the average closing price of the Company's common stock is equal to five times the exercise price of the option for ten consecutive trading days. Notwithstanding the foregoing, the options will immediately vest upon the occurrence of certain conditions such as a change in control. The fair value of the stock option granted was estimated at the trading day of the date of the grant using a Monte Carlo simulation model. The key assumptions utilized to calculate the grant-date fair value for the award is summarized below:
| Issuance Date | September 9, 2024 | |||
| Fair value lower range | $ | — | ||
| Fair value higher range | $ | 15.59 | ||
| Exercise price | $ | 2.75 | ||
| Expected term (in years) | 3.0 - 4.3 | |||
| Expected volatility | 65 | % | ||
| Dividend yield | — | % | ||
| Risk-free rate | 3.7 | % | ||
For the years ended December 31, 2024 and 2023, 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, 2022 | 356,500 | $ | 26.22 | 6.3 | $ | — | ||||||||||
| Granted | — | |||||||||||||||
| Forfeited | (51,334 | ) | — | |||||||||||||
| Expired | (2,833 | ) | ||||||||||||||
| Outstanding as of December 31, 2023 | 302,333 | $ | 25.68 | 5.4 | — | |||||||||||
| Granted(1) | 136,667 | 3.06 | 9.6 | — | ||||||||||||
| Forfeited | — | — | — | |||||||||||||
| Expired | (41,333 | ) | — | — | ||||||||||||
| Outstanding as of December 31, 2024 | 397,667 | $ | 18.33 | 6.2 | — | |||||||||||
| Options exercisable as of December 31, 2024 | 249,001 | $ | 25.90 | 4.3 | — | |||||||||||
| (1) | Balance also includes the stock options granted on June 3, 2024 to one employee of the Company totaling 16,667 that vest equally over annual installments and are exercisable for years after the grant date. |
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, 2024 and 2023, 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, 2023 | 123,833 | $ | 29.72 | 5.4 | ||||||||
| Granted (1) | 136,667 | $ | 3.06 | 9.6 | ||||||||
| Forfeited | (6,000 | ) | — | — | ||||||||
| Vested | (105,834 | ) | — | — | ||||||||
| Unvested as of December 31, 2024 | 148,666 | $ | 5.66 | 9.4 | ||||||||
| (1) | Balance also includes the stock options granted on June 3, 2024 to employee of the Company totaling 16,667 that vest equally over annual installments and are exercisable for years after the grant date. |
For the years ended December 31, 2024 and 2023, compensation expense recognized for stock options of $29 and $0, respectively, was recognized in product development and general and administrative expenses in the consolidated statements of operations. As of December 31, 2024, there was $240 of unrecognized share-based compensation with respect to outstanding stock options.
Restricted stock units and restricted stock
For the years ended December 31, 2024 and 2023, details of unvested RSUs were as follows:
| Weighted average | ||||||||
| Number of units | grant date fair value | |||||||
| Unvested as of December 31, 2022 | 703,859 | $ | 32.22 | |||||
| Granted | 581,185 | 5.34 | ||||||
| Vested and delivered | (203,503 | ) | 17.76 | |||||
| Withheld as treasury stock (1) | (51,903 | ) | 10.92 | |||||
| Vested not delivered (2) | (6,599 | ) | 17.10 | |||||
| Forfeited | (291,501 | ) | 7.20 | |||||
| Unvested as of December 31, 2023 | 731,538 | 25.95 | ||||||
| Granted | 701,028 | 3.62 | ||||||
| Vested and delivered | (319,933 | ) | 10.42 | |||||
| Withheld as treasury stock (1) | — | — | ||||||
| Vested not delivered (2) | 3,833 | 10.60 | ||||||
| Forfeited | (314,941 | ) | 7.29 | |||||
| Unvested as of December 31, 2024 | 801,525 | 20.72 | ||||||
| (1) | As discussed in Note 11, Equity, the treasury stock was related to shares withheld to cover statutory withholding taxes upon the delivery of shares following the vesting of RSUs. As of December 31, 2024 and 2023, there were 768,595 outstanding shares of treasury stock for both periods. |
| (2) | Vested not delivered represents vested RSUs with delivery deferred to a future time. During the year ended December 31, 2024, there was a 3,833 change in the vested not delivered balance due to a net 568 shares that were deferred due to timing of delivery of certain shares, along with 3,265 shares that elected deferred delivery. As of December 31, 2024 and 2023, there were 286,099 and 289,932 outstanding RSUs that were vested not delivered, respectively. |
For the years ended December 31, 2024 and 2023, the Company recognized compensation expense for RSUs of $1,982 and $3,903, 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, 2024, there was $1,946 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, 2024, unrecognized share-based compensation expense associated with the granted RSUs, restricted stock and stock options is $2,186, which is expected to be recognized over a weighted average period of 2.0 years. For the years ended December 31, 2024 and 2023, 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) | 2024 | 2023 | ||||||
| Sales and marketing | $ | 218 | $ | 543 | ||||
| Product development | 239 | 626 | ||||||
| General and administrative | 1,506 | 2,640 | ||||||
| Share-based compensation expense | 1,963 | 3,809 | ||||||
| Capitalized in intangible assets | 48 | 94 | ||||||
| Total share-based compensation | $ | 2,011 | $ | 3,903 | ||||
As of December 31, 2024, the Company recorded a liability of $29 and $22, respectively, related to PSUs that are to be settled in cash.
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 2024, we made matching contributions to the Plan of $966. During 2023, we made matching contributions to the Plan of $1,034.
The Company also has a discretion to award eligible employees under the Plan, profit sharing contributions
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.