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Note 9 - Stockholders' Equity
 12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Stockholders' Equity Note Disclosure [Text Block]

NOTE 9: STOCKHOLDERS’ EQUITY

 

a. Common stock:

 

Holders of common stock are entitled to one vote per share on all matters to be voted upon by the Company’s stockholders. In the event of a liquidation, dissolution or winding up of the Company, holders of common stock are entitled to share ratably in all of the Company’s assets. The Board of Directors may declare a dividend out of funds legally available therefore and the holders of common stock are entitled to receive ratably any such dividends. Holders of common stock have no preemptive rights or other subscription rights to convert their shares into any other securities.

 

b. Preferred stock:

 

The Company is authorized to issue up to 5,000,000 shares of “blank check” preferred stock, par value $0.001 per share. Such preferred stock may be issued by the Board of Directors from time to time in one or more series. These series may have designations, preferences and relative, participating, optional or other special rights and any qualifications, limitations or restrictions thereof, including dividend rights, conversion rights, exchange rights, voting rights, redemption rights (including sinking and purchase fund provisions), and dissolution preferences as may be determined by the Company’s Board of Directors.

 

c. Share repurchase program:

 

In August 2008, the Company announced that its Board of Directors approved a share repurchase program for up to one million shares of common stock which was further extended by an additional 6,400,000 shares in 2010, 2013, 2014, 2018 and 2020.

 

As of December 31, 2022, 278,799 shares of common stock remained authorized for repurchase under the Company’s share repurchase program.

 

 

d. Employee and non-employee stock plans:

 

The Company grants a mix of stock options, SARs capped with a ceiling and RSUs to employees and non‑employee directors of the Company and its subsidiaries under the Company’s equity plans and provides the right to purchase common stock pursuant to the Company’s 2002 employee stock purchase plan to employees of the Company and its subsidiaries.

 

The SAR unit confers the holder the right to stock appreciation over a preset price of the Company’s common stock during a specified period of time. When the unit is exercised, the appreciation amount is paid through the issuance of shares of the Company’s common stock. The ceiling limits the maximum income for each SAR unit. SARs are considered an equity instrument as it is a net share settled award capped with a ceiling (400% for all SAR grants made in years prior to 2016. Starting in 2016, the Company ceased to grant SAR units). The options and SARs granted under the Company’s stock incentive plans have been granted at the fair market value of the Company’s common stock on the grant date. Options and SARs granted to employees under stock incentive plans vest at a rate of 25% of the shares underlying the option after one year and the remaining shares vest in equal portions over the following 36 months, such that all shares are vested after four years. Options granted to non‑employee directors vest 25% of the shares underlying the option on each anniversary of the option grant.

 

A summary of the Company’s stock option and SARs activities and related information for the year ended December 31, 2022, is as follows:

 

  

Number of
options and

SAR units (1)

  

Weighted
average

exercise
price

  

Weighted

average

remaining

contractual

term

  

Aggregate

intrinsic-value

 

Outstanding at the beginning of the year

  126,000  $20.06   2.6  $2,921 

Granted

  —   —         

Exercised

  (19,000)  18.79         

Forfeited or expired

  (1,000)  24.86         

Outstanding at the end of the year (2)

  106,000  $20.24   2.0  $609 

Exercisable at the end of the year (2)

  106,000  $20.24   2.0  $609 

 

 

(1)

The SAR units are convertible for a maximum number of shares of the Company’s common stock equal to 75% of the SAR units subject to the grant.

 

 

(2)

Represent options granted to non-employee directors of the Company only. As of December 31, 2022, there were no outstanding or exercisable SAR units left and no outstanding or exercisable options granted to employees left.

 

In 2020, 2021 and 2022, the Company did not grant options and/or SARs.

 

The total intrinsic value of options and SARs exercised during the years ended December 31, 2020, 2021 and 2022 was $6,876, $7,177 and $273, respectively.

 

A RSU award is an agreement to issue shares of the Company’s common stock at the time the award or a portion thereof vests. RSUs granted to employees generally vest in three equal annual installments starting on the first anniversary of the grant date. Until the end of 2017, RSUs granted to non-employee directors would generally vest in full on the first anniversary of the grant date. Starting in 2018, RSUs granted to non-employee directors would generally vest in two equal annual installments starting on the first anniversary of the grant date.

 

 

On February 14, 2022, the Committee granted 9,935, 5,961, 7,451 and 5,961 time-based RSUs, effective as of February 17, 2022, to each of the Company’s CEO, Executive Vice President, Worldwide Sales, Chief Financial Officer and Chief Operating Officer, respectively, pursuant to the 2011 Plan. The RSU grants vest 33.4% on February 17, 2023, 33.3% on February 17, 2024 and 33.3% on February 17, 2025.

 

Also on February 14, 2022, the Committee granted 14,903, 3,974, 4,969 and 3,974 PSUs, effective as of February 17, 2022, to each of the Company’s CEO, Executive Vice President, Worldwide Sales, Chief Financial Officer and Chief Operating Officer, respectively, pursuant to 2011 Plan (collectively, the “2022 Short-Term Executive PSUs”). The performance goals for the 2022 Short-Term Executive PSUs with specified weighting are as follows:

 

Weighting

Goals

50%

Vesting of the full 50% of the PSUs occurs if the Company achieves the 2022 license, NRE and related revenue target approved by the Board (the “2022 License Revenue Target”). The vesting threshold is achievement of 90% of 2022 License Revenue Target. If the Company’s actual result exceeds 90% of the 2022 License Revenue Target, every 1% increase of the 2022 License Revenue Target, up to 110%, would result in an increase of 2% of the eligible PSUs.

50%

Vesting of the full 50% of the PSUs occurs if the Company achieves positive total shareholder return whereby the return on the Company’s stock for 2022 is greater than the S&P500 index. The vesting threshold is if the return on the Company’s stock for 2022 is at least 90% of the S&P500 index. If the return on the Company’s stock, in comparison to the S&P500, is above 90% but less than 99% of the S&P500 index, 91% to 99% of the eligible PSUs would be subject to vesting. If the return on the Company’s stock exceeds 100% of the S&P500 index, every 1% increase in comparison to the S&P500 index, up to 110%, would result in an increase of 2% of the eligible PSUs.

 

Additionally, PSUs representing an additional 20%, meaning an additional 2,981, 795, 994 and 795, would be eligible for vesting for each of the Company’s CEO, Executive Vice President, Worldwide Sales, Chief Financial Officer and Chief Operating Officer, respectively, if the performance goals set forth above are exceeded.

 

In 2022, the Company achieved 98% of the 2022 License Revenue Target and a negative total shareholder return whereby the return on the Company’s stock for 2022 was lesser than the S&P500 index, so based on the PSU award conditions, the Company’s CEO, Executive Vice President, Worldwide Sales, Chief Financial Officer and Chief Operating Officer received 7,269, 1,938, 2,423 and 1,938 PSUs, respectively.

 

 

The 2022 Short-Term Executive PSUs vest 33.4% on February 17, 2023, 33.3% on February 17, 2024, and 33.3% on February 17, 2025.

 

On November 9, 2022, the Company reported that Gideon Wertheizer had announced his intention to retire from his position as the Company’s CEO and an employee of the Company, effective as of January 1, 2023. In connection with his retirement, the Board determined to accelerate in full the vesting of Mr. Wertheizer’s 34,887 unvested RSUs.

 

On December 7, 2022, Issachar Ohana, the Executive Vice President, Worldwide Sales, and the Board reached an understanding regarding Mr. Ohana’s separation from the Company, effective as of December 31, 2022. In connection with his departure, the Board determined to accelerate in full the vesting of Mr. Ohana’s 16,114 unvested RSUs.

 

A summary of the Company’s RSU and PSU activities and related information for the year ended December 31, 2022, is as follows:

 

  

Number of
RSUs and

PSUs

  

Weighted average

grant-date
fair value

 

Unvested as at the beginning of the year

  688,073  $41.18 

Granted

  628,611   34.52 

Vested

  (330,211)  37.61 

Forfeited

  (107,196)  43.72 

Unvested at the end of the year

  879,277  $37.57 

 

Stock Plans

 

As of December 31, 2022, the Company maintains the Company’s 2003 Director Stock Option Plan (the “Director Plan”) and the 2011 Stock Incentive Plan (the “2011 Plan” and together with the Director Plan, the “Stock Plans”).

 

As of December 31, 2022, options, SARs, RSUs and PSUs to purchase 464,946 shares of common stock were available for grant under the Stock Plans.

 

2011 Stock Incentive Plan

 

The 2011 Plan was adopted by the Company’s Board of Directors in February 2011 and stockholders on May 17, 2011. Up to 3,200,000 shares of common stock (subject to adjustment in the event of future stock splits, future stock dividends or other similar changes in the common stock or the Company’s capital structure), plus the number of shares that remain available for grant of awards under the Company’s 2002 Stock Incentive Plan (the “2002 Plan) , plus any shares that would otherwise return to the 2002 Plan as a result of forfeiture, termination or expiration of awards previously granted under the 2002 plan (subject to adjustment in the event of stock splits and other similar events), are reserved for issuance under the 2011 Plan. The 2002 Plan was automatically terminated and replaced and superseded by the 2011 Plan, except that any awards previously granted under the 2002 Plan shall remain in effect pursuant to their term. As of December 31, 2022, there were no outstanding equity awards remaining in the 2002 Plan.

 

On June 2, 2022, the Company’s stockholders approved an amendment and restatement of the 2011 Plan to have any shares which remain available for issuance or that would otherwise return to the Company’s Director Plan as a result of forfeiture, termination or expiration of awards be rolled over to the 2011 Plan, resulting in an immediate increase of 273,693 shares at time of the approval.

 

 

The 2011 Plan provides for the grant of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code, nonqualified stock options, restricted stock, RSUs, dividend equivalent rights and stock appreciation rights. Officers, employees, directors, external consultants and advisors of the Company and those of the Company’s present and future parent and subsidiary corporations are eligible to receive awards under the 2011 Plan. Under current U.S. tax laws, incentive stock options may only be granted to employees. The 2011 Plan permits the Company's Board of Directors or a committee thereof to determine how grantees may pay the exercise or purchase price of their awards.

 

Unless sooner terminated, the 2011 Plan is effective until April 2030.

 

The Company’s Board of Directors or a committee thereof has authority to administer the 2011 Plan. The Company’s Board of Directors has the authority to adopt, amend and repeal the administrative rules, guidelines and practices relating to the 2011 Plan and to interpret its provisions.

 

2003 Director Stock Option Plan

 

Under the Director Plan, 1,350,000 shares of common stock (subject to adjustment in the event of future stock splits, future stock dividends or other similar changes in the common stock or the Company’s capital structure) are authorized for issuance.

 

The Director Plan provides for the grant of nonqualified stock options to non-employee directors. Options must be granted at an exercise price equal to the fair market value of the common stock on the date of grant. Options may not be granted for a term in excess of ten years.

 

Under the original terms of the Director Plan, (a) any person who becomes a non-employee director of the Company was automatically granted an option to purchase 38,000 shares of common stock, (b) on June 30 of each year, beginning in 2004, each non-employee director who had served on the Company’s Board of Directors for at least six (6) months as of such date was automatically granted an option with the exercise price being the fair market value of the Company’s common stock as of July 1st of each year to purchase 13,000 shares of common stock, and each non-employee director would receive an option with the exercise price being the fair market value of the Company’s common stock as of July 1st of each year to purchase 13,000 shares of common stock for each committee on which he or she had served as chairperson for at least six months prior to such date, and (c) the Chairman of the Board was granted an additional option with the exercise price being the fair market value of the Company’s common stock as of July 1st of each year to purchase 15,000 shares of common stock on an annual basis. In February 2015, the Board suspended the automatic grant of stock options to each non-employee director and the Chairman of the Board under the Director Plan.  In lieu of the automatic stock option grants under the Director Plan, the Board approved an equity award to all current directors of the Company consisting solely of RSUs granted under the 2011 Plan.  From February 2015 to 2017, the Chairman of the Board of Directors would receive a RSU award with an annualized value of $268,520, directors with a chairperson position on any committee of the Board of Directors would receive a RSU award with an annualized value of $249,340 and all other directors would receive a RSU award with an annualized value of $124,670. In response to market trends, in lieu of the prior annualized values of the RSU awards to directors, starting in July 2018, each director was granted shares of RSUs based on an annualized value of $124,670, which vest 50% on the first year anniversary of the grant date and the remaining 50% on the second year anniversary of the grant date. In July 2020, 2021 and 2022, based on the new parameters, the directors of the Company received a grant of RSUs in the aggregate amount of 26,984 RSUs, 21,392 RSUs and 26,551 RSUs, respectively. In February 2019, the Board determined that each new director of the Company, in lieu of an option to purchase 38,000 shares of common stock, would receive a RSU award with an annualized value of $124,670.

 

 

As mentioned above, on June 2, 2022, the Company’s stockholders approved an amendment and restatement of the 2011 Plan to have any shares which remain available for issuance or that would otherwise return to the Company’s Director Plan be rolled over to the 2011 Plan. As a result, as of December 31, 2022, there were no outstanding equity awards remaining in the Director Plan.

 

The Company’s Board of Directors or a committee thereof has authority to administer the Director Plan. The Company’s Board of Directors or a committee thereof has the authority to adopt, amend and repeal the administrative rules, guidelines and practices relating to the Director Plan and to interpret its provisions.

 

2002 Employee Stock Purchase Plan (“ESPP”)

 

The ESPP was adopted by the Company’s Board of Directors and stockholder in July 2002. The ESPP is intended to qualify as an “Employee Stock Purchase Plan” under Section 423 of the U.S. Internal Revenue Code and is intended to provide the Company’s employees with an opportunity to purchase shares of common stock through payroll deductions. An aggregate of 3,050,000 shares of common stock (subject to adjustment in the event of future stock splits, future stock dividends or other similar changes in the common stock or the Company’s capital structure) are reserved for issuance. As of December 31, 2022, 89,238 shares of common stock were available for future issuance under the ESPP.

 

All of the Company’s employees who are regularly employed for more than five months in any calendar year and work 20 hours or more per week are eligible to participate in the ESPP. Non-employee directors, consultants, and employees subject to the rules or laws of a foreign jurisdiction that prohibit or make impractical their participation in an employee stock purchase plan are not eligible to participate in the ESPP.

 

The ESPP designates offer periods, purchase periods and exercise dates. Offer periods generally will be overlapping periods of 24 months. Purchase periods generally will be six-month periods. Exercise dates are the last day of each purchase period. In the event the Company merges with or into another corporation, sells all or substantially all of the Company’s assets, or enters into other transactions in which all of the Company’s stockholders before the transaction own less than 50% of the total combined voting power of the Company’s outstanding securities following the transaction, the Company’s Board of Directors or a committee designated by the Board may elect to shorten the offer period then in progress.

 

The price per share at which shares of common stock may be purchased under the ESPP during any purchase period is the lesser of:

 

 

●

85% of the fair market value of common stock on the date of grant of the purchase right, which is the commencement of an offer period; or

 

 

●

85% of the fair market value of common stock on the exercise date, which is the last day of a purchase period.

 

The participant’s purchase right is exercised in the above noted manner on each exercise date arising during the offer period unless, on the first day of any purchase period, the fair market value of common stock is lower than the fair market value of common stock on the first day of the offer period. If so, the participant’s participation in the original offer period will be terminated, and the participant will automatically be enrolled in the new offer period effective the same date.

 

The ESPP is administered by the Board of Directors or a committee designated by the Board, which will have the authority to terminate or amend the plan, subject to specified restrictions, and otherwise to administer and resolve all questions relating to the administration of the plan.

 

e. Dividend policy:

 

The Company has never declared or paid any cash dividends on its capital stock and does not anticipate paying any cash dividends in the foreseeable future.