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Note 12 - Common Stock and Stock-based Compensation Plans (Unaudited) | 9 Months Ended
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Sep. 30, 2023
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] |
NOTE 12: | COMMON STOCK AND STOCK-BASED COMPENSATION PLANS (UNAUDITED)
The Company has historically granted a mix of stock options, stock appreciation rights (“SARs”) capped with a ceiling and restricted stock units (“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. As of September 30, 2023, and December 31, 2022, there were no outstanding or exercisable SARs left. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED (UNAUDITED) The options 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 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 activities and related information for the nine months ended September 30, 2023, are as follows:
|  | Number of options |  |  | Weighted average exercise price |  |  | Weighted average remaining contractual term |  |  | Aggregate intrinsic value |
Outstanding as of December 31, 2022 |  |  | 106,000 |  |  | $ | 20.24 |  |  |  | 2.0 |  |  | $ | 609 |
Granted |  |  | 19,425 |  |  |  | 21.62 |  |  |  |  |  |  |  |  |
Exercised |  |  | (26,000 | ) |  |  | 19.36 |  |  |  |  |  |  |  |  |
Forfeited or expired |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Outstanding as of September 30, 2023 (unaudited) |  |  | 99,425 |  |  | $ | 20.74 |  |  |  | 2.8 |  |  | $ | 120 |
Exercisable as of September 30, 2023 (unaudited) |  |  | 80,000 |  |  | $ | 20.53 |  |  |  | 1.8 |  |  | $ | 120 |
As of September 30, 2023, there was $212 of unrecognized compensation expense related to unvested stock options. This amount is expected to be recognized over a weighted-average period of 2.4 years. An 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 November 9, 2022, the Company reported that Gideon Wertheizer had announced his intention to retire from his position as the Company’s Chief Executive Officer (“CEO”) and an employee of the Company, effective as of January 1, 2023. In connection with his retirement, the Company’s Board of Directors (the “Board”) determined to accelerate in full the vesting of Mr. Wertheizer’s 34,887 unvested RSUs. On November 9, 2022, the Company publicly announced the appointment of Amir Panush as CEO of the Company to succeed Mr. Wertheizer, with his service as CEO to commence on January 1, 2023. In connection with his appointment as the Company’s CEO, Mr. Panush, effective January 1, 2023, received 46,911 RSUs with fair value of approximately $1,200 under the Company’s Amended and Restated 2011 Stock Incentive Plan (the “2011 Plan”). The RSUs vest in three equal annual installments starting on the first anniversary of the grant date, conditioned upon Mr. Panush’s continued service with the Company. On December 7, 2022, the Board appointed Gweltaz Toquet, who previously served as the Vice President of Sales for Europe and Asia Pacific, as Chief Commercial Officer (“CCO”) of the Company effective January 1, 2023. In connection with his appointment as the Company’s CCO, effective January 1, 2023, Mr. Toquet received 3,909 RSUs with fair value of approximately $100 under the Company’s 2011 Plan. The RSUs vest in three equal annual installments starting on the first anniversary of the grant date, conditioned upon Mr. Toquet’s continued service with the Company. On February 14, 2023, the Compensation Committee (the “Committee”) of the Board granted 14,541, 9,996, 8,179 and 5,452 RSUs, effective as of February 17, 2023, to each of the Company’s CEO, Chief Financial Officer (“CFO”), Chief Operating Officer (“COO”) and CCO, respectively, pursuant to the 2011 Plan, or, with respect to the RSU award to the CEO, as an inducement award in accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules granted on terms substantially similar to those of the 2011 Plan (an “Inducement Award”). The RSU grants vest 33.4% on February 17, 2024, 33.3% on February 17, 2025 and 33.3% on February 17, 2026. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED (UNAUDITED) Also, on February 14, 2023, the Committee granted 21,811, 6,664, 5,452 and 3,635 performance-based stock units, effective as of February 17, 2023, to each of the Company’s CEO, CFO, COO and CCO, respectively, pursuant to the 2011 Plan, or, with respect to the CEO, as an Inducement Award (collectively, the “Short-Term Executive PSUs”). The performance goals for the 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 2023 license and related revenue target approved by the Board (the “2023 License Revenue Target”). The vesting threshold is achievement of 90% of 2023 License Revenue Target. If the Company’s achievement of the 2023 License Revenue Target is above 90% but less than 99% of the 2023 License Revenue Target, 91% to 99% of the eligible PSUs would be subject to vesting. If the Company’s actual result exceeds 100% of the 2023 License Revenue Target, every 1% increase of the 2023 License Revenue Target, up to 110%, would result in an increase of 2% of the eligible PSUs for the Company’s CFO, COO and CCO and an increase of 3% of the eligible PSUs for the Company’s CEO.
25% | Vesting of the full 25% of the PSUs occurs if the Company achieves positive total shareholder return whereby the return on the Company’s stock for 2023 is greater than the S&P Semiconductors Select Industry index (the “S&P index”). The vesting threshold is if the return on the Company’s stock for 2023 is at least 90% of the S&P index. If the return on the Company’s stock, in comparison to the S&P index, is above 90% but less than 99% of the S&P 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&P index, every 1% increase in comparison to the S&P index, up to 110%, would result in an increase of 2% of the eligible PSUs for the Company’s CFO, COO and CCO and an increase of 3% of the eligible PSUs for the Company’s CEO.
25% | Vesting of the full 25% of the PSUs occurs if the Company achieves positive total shareholder return whereby the return on the Company’s stock for 2023 is greater than the Russell 2000 index (the “Russell index”). The vesting threshold is if the return on the Company’s stock for 2023 is at least 90% of the Russell index. If the return on the Company’s stock, in comparison to the Russell index, is above 90% but less than 99% of the Russell 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 Russell index, every 1% increase in comparison to the Russell index, up to 110%, would result in an increase of 2% of the eligible PSUs for the Company’s CFO, COO and CCO and an increase of 3% of the eligible PSUs for the Company’s CEO.
(*) As of September 30, 2023, the Company's management estimates that it is not probable that the performance condition will be met by year end. On November 6, 2023, the Committee revised the 2023 License Revenue Target to exclude revenues from Intrinsix. Accordingly, assuming maximum achievement of the performance goals set forth above, PSUs representing an additional 30%, meaning an additional 6,543, would be eligible for vesting of the Company’s CEO, and an additional 20%, meaning an additional 1,332, 1,090 and 727, would be eligible for vesting for each of the Company’s CFO, COO and CCO, respectively. Subject to achievement of the thresholds the above performance goals for 2023, the Short-Term Executive PSUs vest 33.4% on February 17, 2024, 33.3% on February 17, 2025 and 33.3% on February 17, 2026. NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED (UNAUDITED) Also, on February 14, 2023, the Committee granted 60,587, 30,293, 30,293 and 30,293 PSUs, effective as of February 17, 2023, to each of the Company’s CEO, CFO, COO and CCO, respectively, pursuant to the 2011 Plan, or, with respect to the CEO, as an Inducement Award (collectively, the “Long-Term Executive PSUs”). The Long-Term Executive PSUs shall vest in full upon the first achievement of any of the following performance goals:
| ● | If the Company’s compound annual growth rate for non-GAAP Earnings Per Share (“EPS”) for each fiscal year over the three-year period from 2022 through 2025 reaches 10% or if the Company’s non-GAAP EPS for any fiscal year reaches $1.00 during the period between January 1, 2023 and December 31, 2025;
| ● | If the Company’s non-GAAP operating margin for any fiscal year reaches 20% during the period between January 1, 2023 and December 31, 2025;
| ● | If the Company’s compound annual growth rate for revenue for each fiscal year over the three year period from 2022 through 2025 reaches 10% or if the Company’s revenue for any fiscal year reaches $180 million during the period between January 1, 2023 and December 31, 2025; or
| ● | If the Company’s market capitalization (defined as total outstanding shares as of a given date multiplied by the closing price for the Company’s common stock as quoted by the NASDAQ Stock Market) reaches at least $1.1 billion for at least 30 days of consecutive trading.
A summary of the Company’s RSU and PSU activities and related information for the nine months ended September 30, 2023, are as follows:
|  | Number of RSUs and PSUs |  |  | Weighted Average Grant- Date Fair Value |
Unvested as of December 31, 2022 |  |  | 879,277 |  |  | $ | 37.57 |
Granted |  |  | 880,053 |  |  |  | 20.94 |
Vested |  |  | (339,329 | ) |  |  | 39.03 |
Forfeited or expired |  |  | (116,448 | ) |  |  | 35.17 |
Unvested as of September 30, 2023 (unaudited) |  |  | 1,303,553 |  |  | $ | 26.18 |
As of September 30, 2023, there was $25,733 of unrecognized compensation expense related to unvested RSUs and PSUs. This amount is expected to be recognized over a weighted-average period of 1.5 years. The following table shows the total equity-based compensation expense included in the interim condensed consolidated statements of loss:
|  | Nine months ended September 30, |  |  | Three months ended September 30, |
|  | 2023 (unaudited) |  |  | 2022 (unaudited) |  |  | 2023 (unaudited) |  |  | 2022 (unaudited) |
Cost of revenue |  | $ | 636 |  |  | $ | 511 |  |  | $ | 216 |  |  | $ | 187 |
Research and development, net |  |  | 6,703 |  |  |  | 5,988 |  |  |  | 2,257 |  |  |  | 2,105 |
Sales and marketing |  |  | 1,305 |  |  |  | 1,030 |  |  |  | 478 |  |  |  | 380 |
General and administrative |  |  | 2,787 |  |  |  | 2,004 |  |  |  | 1,018 |  |  |  | 699 |
Total equity-based compensation expense from continuing operations |  |  | 11,431 |  |  |  | 9,533 |  |  |  | 3,969 |  |  |  | 3,371 |
Equity-based compensation expense included in discontinued operations |  |  | 875 |  |  |  | 850 |  |  |  | 273 |  |  |  | 320 |
Total equity-based compensation expense |  | $ | 12,306 |  |  | $ | 10,383 |  |  | $ | 4,242 |  |  | $ | 3,691 |
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS- CONTINUED (UNAUDITED) The fair value for rights to purchase shares of common stock under the Company’s employee stock purchase plan was estimated on the date of grant using the following assumptions:
|  | Nine months ended September 30 |  | Three months ended September 30
|  | 2023 (unaudited) |  | 2022 (unaudited) |  | 2023 (unaudited) |  | 2022 (unaudited)
Expected dividend yield |  | 0% |  | 0% |  |  | 0 | % |  |  | 0%
Expected volatility |  | 45% | - | 47% |  | 38% | - | 50% |  |  | 47 | % |  | 40% | - | 50%
Risk-free interest rate |  | 4.8% | - | 5.5% |  | 0.5% | - | 3.0% |  |  | 5.5 | % |  | 0.8% | - | 3.0%
Contractual term of up to (months) |  | 6 |  | 6 |  |  | 6 |  |  | 6

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