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Note 10 - Stock-based Compensation | 9 Months Ended
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Sep. 30, 2021
Notes to Financial Statements |
Share-based Payment Arrangement [Text Block] |
(10) | STOCK-BASED COMPENSATION
As of September 30, 2021, we had unvested restricted stock awards and stock options granted under stock-based compensation plans that are described more fully in Note 13 to the consolidated financial statements in our 2020 Form 10-K. Our unvested restricted stock awards and stock options are accounted for based on their grant date fair value. As of September 30, 2021, total compensation expense to be recognized in future periods is $2,928. The weighted average period over which this expense is expected to be recognized is 2.6 years. The following table shows the allocation of the compensation expense we recorded during the three months and nine months ended September 30, 2021 and 2020, respectively, related to stock-based compensation:
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Cost of revenues |  | $ | 10 |  |  | $ | - |  |  | $ | 17 |  |  | $ | - |
Selling expense |  |  | 8 |  |  |  | 3 |  |  |  | 17 |  |  |  | 9 |
Engineering and product development expense |  |  | 17 |  |  |  | 10 |  |  |  | 43 |  |  |  | 31 |
General and administrative expense |  |  | 336 |  |  |  | 72 |  |  |  | 1,017 |  |  |  | 440 |
|  | $ | 371 |  |  | $ | 85 |  |  | $ | 1,094 |  |  | $ | 480 |
There was no stock-based compensation expense capitalized in the three months or nine months ended September 30, 2021 or 2020. Restricted Stock Awards We record compensation expense for restricted stock awards based on the quoted market price of our stock at the grant date and amortize the expense over the vesting period. Restricted stock awards generally vest over four years for employees and over one year for our independent directors (25% at each of March 31, June 30, September 30, and December 31 of the year in which they were granted). On August 24, 2020, our new President and CEO received two restricted stock awards totaling 141,610 shares valued at $650 as of the date of grant, which was also his hire date. Of the total shares awarded, 66,448 shares vest over 4 years (25% at each anniversary) and 75,162 shares vest on the third anniversary of the grant date at a vesting percentage that could range from 0% to 150% of the number of shares awarded on August 24, 2020. The final vesting percentage will be based on the achievement of certain performance metrics, including net revenue compound annual growth rate and diluted earnings per share excluding amortization of intangibles, for specified time periods as determined by the Compensation Committee of our Board of Directors. As of September 30, 2021, we have estimated that these shares will vest at 100% of the original amount awarded and are recording expense based on this estimate on a straight-line basis over the three-year vesting period. Our estimate of the final expected vesting percentage is reassessed and adjusted, as needed, at the end of each reporting period. On March 10, 2021, we issued restricted stock awards totaling 18,000 shares to members of the senior management within our operating segments. These shares will vest on the third anniversary of the grant date at a vesting percentage that could range from 0% to 150% of the number of shares awarded on March 10, 2021. The final vesting percentage will be based on the achievement of certain performance metrics related to the operating results of the business units for which these members of management are responsible. As of September 30, 2021, we have estimated that these shares will vest at 100% of the original amount awarded and are recording expense based on this estimate on a straight-line basis over the three-year vesting period. Our estimate of the final expected vesting percentage is reassessed and adjusted, as needed, at the end of each reporting period. On June 14, 2021, our new CFO received two restricted stock awards totaling 7,941 shares valued at $133 as of the date of grant, which was also his hire date. Of the total shares awarded, 1,988 shares vest over 4 years (25% at each anniversary) and 5,953 shares vest on August 24, 2023 at a vesting percentage that could range from 0% to 150% of the number of shares awarded on June 14, 2021. The final vesting percentage will be based on the achievement of certain performance metrics, including net revenue compound annual growth rate and diluted earnings per share excluding amortization of intangibles, for specified time periods as determined by the Compensation Committee of our Board of Directors. As of September 30, 2021, we have estimated that these shares will vest at 100% of the original amount awarded and are recording expense based on this estimate on a straight-line basis over the vesting period. Our estimate of the final expected vesting percentage is reassessed and adjusted, as needed, at the end of each reporting period. The following table summarizes the activity related to unvested shares of restricted stock for the nine months ended September 30, 2021:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Unvested shares outstanding, January 1, 2021 |  |  | 237,155 |  |  | $ | 4.93 |
Granted |  |  | 126,209 |  |  |  | 11.74 |
Vested |  |  | (78,206 | ) |  |  | 7.24 |
Forfeited |  |  | (18,125 | ) |  |  | 9.02 |
Unvested shares outstanding, September 30, 2021 |  |  | 267,033 |  |  |  | 7.19 |
The total fair value of the shares that vested during the nine months ended September 30, 2021 and 2020 was $981 and $296, respectively, as of the vesting dates of these shares. Stock Options We record compensation expense for stock options based on the fair value of the options as of the grant date. No option may be granted with an exercise period in excess of ten years from the date of grant. Generally, stock options will be granted with an exercise price equal to the fair market value of our stock on the date of grant and will vest over four years. The fair value for stock options granted during the nine months ended September 30, 2021 and 2020 was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
|  | 2021 |  |  | 2020 |
Risk-free interest rate |  |  | 1.03 | % |  |  | 0.46 | %
Dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Expected common stock market price volatility factor |  |  | .50 |  |  |  | .44 |
Weighted average expected life of stock options (years) |  |  | 6.25 |  |  |  | 6.25 |
The per share weighted average fair value of stock options issued during the nine months ended September 30, 2021 and 2020 was $5.70 and $1.48, respectively. The following table summarizes the activity related to stock options for the nine months ended September 30, 2021:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Options outstanding, January 1, 2021 (204,630 exercisable) |  |  | 438,200 |  |  | $ | 6.25 |
Granted |  |  | 282,404 |  |  |  | 11.77 |
Exercised |  |  | (149,010 | ) |  |  | 6.84 |
Forfeited |  |  | (80,550 | ) |  |  | 9.55 |
Options outstanding, September 30, 2021 (141,370 exercisable) |  |  | 491,044 |  |  |  | 8.70 |

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