Ring Energy, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN AND 401(K)

EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN AND 401(K)

12 Months Ended

Dec. 31, 2023

EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN AND 401(k)

EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN AND 401(K)

NOTE 12 — EMPLOYEE STOCK OPTIONS, RESTRICTED STOCK AWARD PLAN, AND 401(K)

Compensation expense charged against income for share-based awards during the years ended December 31, 2023, 2022, and 2021 was $8,833,425, $7,162,231, and $2,418,323, respectively. These amounts are included in General and administrative expense in the Statements of Operations.

In 2011, the Board approved and adopted a long-term incentive plan (the “2011 Plan”), which was subsequently approved and amended by the shareholders. There were 536,755 shares eligible for grant, either as stock options or as restricted stock, as of December 31, 2023.

In 2021, the Board approved and adopted the Ring Energy, Inc. 2021 Omnibus Incentive Plan (the “2021 Plan”), which was subsequently approved by the shareholders at the 2021 Annual Meeting. The 2021 Plan provides that the Company may grant options, stock appreciation rights, restricted shares, restricted stock units, performance-based awards, other share-based awards, other cash-based awards, or any combination of the foregoing. At the 2023 Annual Meeting, the shareholders approved an amendment to the 2021 Plan to increase the number of shares available under the 2021 Plan by 6.0 million. Accordingly, there were 8,224,394 shares available for grant as of December 31, 2023 under the 2021 Plan.

Employee Stock Options – No stock options were granted in the years ended December 31, 2023, 2022, or 2021. All outstanding stock option awards vest at the rate of 20% each year over five years beginning one year from the date granted

and expire ten years from the grant date. A summary of the status of the stock options as of December 31, 2023, 2022, and 2021 and changes during the years ended December 31, 2023, 2022, and 2021 is as follows:


	2023			2022			2021
	Options	Weighted- Average Exercise Price		Options	Weighted- Average Exercise Price		Options	Weighted- Average Exercise Price
Outstanding at beginning of year	265,500	$	4.21	365,500	$	3.61	465,500	$	3.26
Granted	—	—		—	—		—	—
Forfeited	—	—		—	—		—	—
Expired	(195,000)	2.00		—	—		—	—
Exercised	—	—		(100,000)	2.00		(100,000)	2.00

Outstanding at end of year	70,500	$	10.33	265,500	$	4.21	365,500	$	3.61

Exercisable at end of year	70,500	$	10.33	265,500	$	4.21	365,500	$	3.61

For the years ended December 31, 2023, 2022, and 2021, the Company incurred share-based compensation expense related to stock options of $0, $0, and $20,934, respectively. As of December 31, 2023, the Company had $0 of unrecognized compensation cost related to stock options. The aggregate intrinsic value of options vested and expected to vest as of December 31, 2023 was $0. The aggregate intrinsic value of options exercisable at December 31, 2023 was $0. The year-end intrinsic values are based on a December 31, 2023 closing stock price of $1.46.

No stock options were exercised during 2023. Stock options exercised of 100,000 shares in 2022 had an aggregate intrinsic value on the date of exercise of $221,000. Stock options exercised of 100,000 shares in 2021 had an aggregate intrinsic value on the date of exercise of $114,000.

The following table summarizes information related to the Company’s stock options outstanding as of December 31, 2023:


		Options Outstanding
Exercise price		Number Outstanding	Weighted- Average Remaining Contractual Life (in years)	Number Exercisable

5.50		5,000	0.21	5,000
14.54		10,000	1.74	10,000
8.00		4,500	1.92	4,500
6.42		15,000	2.34	15,000
11.75		36,000	2.95	36,000
$	10.33	70,500	2.39	70,500

Restricted stock unit grants – Following is a table reflecting the restricted stock unit grants during 2023, 2022 and 2021:


Grant date						# of restricted stock units
April 30, 2021						33,950
June 17, 2021						1,162,152
July 6, 2021						11,824
July 12, 2021						4,007
September 1, 2021						10,417
September 8, 2021						3,306
February 9, 2022						1,247,061
April 13, 2022						7,143
May 10, 2022						10,349
June 16, 2022						2,150
July 14, 2022						8,547
August 29, 2022						30,581
September 1, 2022						37,797
September 19, 2022						49,645
February 16, 2023						2,270,842

Restricted stock unit grants issued prior to 2020 vest at the rate of 20% each year over five years beginning one year from the date granted. Restricted stock unit grants issued during 2020 and in following years vest at a rate of 33% each year over three years beginning one year from the date granted for all employees; for members of the Board, the 2021 restricted stock unit grants vest on the earliest of (i) the day before the next shareholder meeting or (ii) the first anniversary of the date of the award for 2022 restricted stock units. Forfeitures are recognized as a reduction to share-based compensation expense in the period of occurrence. A summary of the status of restricted stock unit grants and changes during the years ended December 31, 2023, 2022 and 2021 is as follows:


	2023			2022			2021
	Restricted stock units	Weighted- Average Grant Date Fair Value		Restricted stock units	Weighted- Average Grant Date Fair Value		Restricted stock units	Weighted- Average Grant Date Fair Value
Outstanding at beginning of year	2,623,790	$	2.29	2,572,596	$	1.75	2,132,297	$	2.94
Granted	2,270,842	2.22		1,393,273	2.83		1,225,656	2.77
Forfeited or rescinded	(66,174)	2.22		(31,185)	2.83		—	—
Vested	(1,680,232)	1.99		(1,310,894)	1.79		(785,357)	1.37
Outstanding at end of year	3,148,226	$	2.40	2,623,790	$	2.29	2,572,596	$	1.75

For the years ended December 31, 2023, 2022 and 2021, the Company incurred share-based compensation expense related to restricted stock unit grants of $4,537,026, $4,148,639, and $2,225,895, respectively. As of December 31, 2023, the Company had $2,778,549 of unrecognized compensation cost related to restricted stock unit grants that will be recognized over a weighted average period of 1.72 years.

During 2023, 2022, and 2021, 1,680,232, 1,310,894, and 785,357 restricted stock units vested, respectively. At the dates of vesting those restricted stock units had an aggregate intrinsic value of $3,203,568, $3,807,996, and $2,049,603, respectively.

Performance Stock Units - In accordance with the 2021 Plan, as of November 22, 2021, the Company entered into performance stock unit (“PSU”) agreements (the “PSU Agreement”) with certain employees. The PSUs are performance-based restricted stock units subject to the terms of the 2021 Plan and the PSU Agreement. Upon Board approval, a total of

860,216 PSUs were granted to the Company’s five executive officers (the “2021 PSU Awards”). The performance period for the 2021 PSU Awards began on January 1, 2021, and ended on December 31, 2023. Based on the achievement of the performance goals for the 2021 PSU Awards, a total of 1,170,024 PSUs vested on December 31, 2023. On February 9, 2022, the Company granted a total of 860,216 PSUs to the Company's five executive officers (the "2022 PSU Awards"). The performance period for the 2022 PSU Awards began on January 1, 2022, and will end on December 31, 2024. The PSUs are performance-based restricted stock units subject to the terms of the 2021 Plan and the PSU Agreement. On February 16, 2023, the Company granted a total of 1,162,162 PSUs to the Company's five executive officers (the "2023 PSU Awards"). The performance period for the 2023 PSU Awards began on January 1, 2023, and will end on December 31, 2025.

A summary of the status of the PSU awards and changes during the years ended December 31, 2023, 2022 and 2021 are as follows:


	2023			2022			2021
	Performance Stock Units	Weighted- Average Grant Date Fair Value		Performance Stock Units	Weighted- Average Grant Date Fair Value		Performance Stock Units	Weighted- Average Grant Date Fair Value
Outstanding at beginning of year	1,720,432	$	3.76	860,216	$	3.87	—	$	—
Granted	1,162,162	2.71		860,216	3.65		860,216	3.87
Incremental performance stock units vested	309,808	—		—	—		—	—
Forfeited or rescinded	—	—		—	—		—	—
Vested	(1,170,024)	3.66		—	—		—	—
Outstanding at end of year	2,022,378	$	3.11	1,720,432	$	3.76	860,216	$	3.87

No forfeitures for the PSU awards have been recognized as of December 31, 2023, but the Company would recognize any such forfeitures in the period of occurrence as a reduction to share-based compensation expense. For the years ended December 31, 2023, 2022 and 2021, the Company incurred share-based compensation expense related to the PSU Awards of $4,296,399, $3,013,592, and $171,494, respectively. As of December 31, 2023, the Company had $4,015,133 of unrecognized compensation cost related to the PSU Awards that will be recognized over a weighted average period of 1.57 years.

During 2023, 1,170,024 PSUs vested. At the dates of vesting those PSUs had an aggregate intrinsic value of $1,708,235.

401(k) Plan - In 2019, the Company initiated a sponsored 401(k) plan that is a defined contribution plan for the benefit of all eligible employees. The plan allows eligible employees, after a three-month waiting period, to make pre-tax or after-tax contributions, not to exceed annual limits established by the federal government. The Company makes matching contributions of up to 6% of any employee’s compensation. Employees are 100% vested in the employer contribution upon receipt.

The following table presents the matching contributions expense recognized for the Company’s 401(k) plan for the years ended December 31, 2023, 2022, and 2021:


	2023		2022		2021
Employer safe harbor match	$	346,268	$	284,094	$	228,273