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Note 10 - Stock-based Compensation Plan | 3 Months Ended
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Mar. 31, 2023
Notes to Financial Statements |
Share-Based Payment Arrangement [Text Block] |
(10) | STOCK-BASED COMPENSATION PLAN
As of March 31, 2023, we had unvested restricted stock awards and stock options granted under stock-based compensation plans that are described more fully in Note 15 to the consolidated financial statements in our 2022 Form 10-K. Our unvested restricted stock awards and stock options are accounted for based on their grant date fair value. As of March 31, 2023, total compensation expense to be recognized in future periods was $4,537. The weighted average period over which this expense is expected to be recognized was 2.3 years. The following table summarizes the compensation expense we recorded during the three months ended March 31, 2023 and 2022 related to unvested shares of restricted stock and stock options:
|  | Three Months Ended March 31, |
|  | 2023 |  |  | 2022 |
Cost of revenue |  | $ | 19 |  |  | $ | 11 |
Selling expense |  |  | 10 |  |  |  | 7 |
Engineering and product development expense |  |  | 10 |  |  |  | 19 |
General and administrative expense |  |  | 435 |  |  |  | 335 |
|  | $ | 474 |  |  | $ | 372 |
There was no compensation expense capitalized in three months ended March 31, 2023 or 2022. Stock Options We record compensation expense for stock options based on the fair market 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 three months ended March 31, 2023 and 2022 was estimated at the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
|  | 2023 |  |  | 2022 |
Risk-free interest rate |  |  | 3.94 | % |  |  | 1.81 | %
Dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Expected common stock market price volatility factor |  |  | .57 |  |  |  | .54 |
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 three months ended March 31, 2023 and 2022 was $9.32 and $5.19, respectively. The following table summarizes the activity related to stock options for the three months ended March 31, 2023:
|  | Number of Shares |  |  | Weighted Average Exercise Price |
Options outstanding, January 1, 2023 (167,886 exercisable) |  |  | 580,419 |  |  | $ | 8.91 |
Granted |  |  | 90,392 |  |  |  | 16.06 |
Exercised |  |  | (25,200 | ) |  |  | 6.55 |
Canceled |  |  | (23,859 | ) |  |  | 9.09 |
Options outstanding, March 31, 2023 (185,246 exercisable) |  |  | 621,752 |  |  |  | 10.04 |
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). Since August 2020, we have increasingly granted performance-based restricted stock awards where the ultimate number of shares that vest can vary between 0% and 150% of the amount of the original award and is based on the achievement of specified performance metrics. Vesting for these awards is generally cliff vesting at the end of the period over which the performance metrics are measured. Compensation expense for these awards is recorded on a straight-line basis over the vesting period and is based on the expected final vesting percentage, which is re-assessed at the end of each reporting period and adjusted with a catch-up adjustment, as needed. Our initial assumption at the grant date of these awards is that the award will vest at the 100% level. On August 24, 2020, our new President and Chief Executive Officer ("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 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. At March 31, 2023, we have estimated that these shares will vest at 150% of the original amount based on our assessment of the probable achievement against the relevant performance metrics. On March 10, 2021, we issued restricted stock awards totaling 18,000 shares to members of 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. At March 31, 2023, we have estimated that 12,000 of these shares will vest at 100% of the original amount. The remaining 6,000 shares were not expected to vest and, in fact, were forfeited during the first quarter of 2023 when the individual to whom they had been granted resigned from his position with us. 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 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. At March 31, 2023, we have estimated that these shares will vest at 150% of the original amount based on our assessment of the probable achievement against the relevant performance metrics. On October 1, 2021, we issued restricted stock awards totaling 5,000 shares to a member of senior management. These shares will vest on January 1, 2025 at a vesting percentage that could range from 0% to 150% of the number of shares awarded on October 1, 2021. The final vesting percentage will be based on the achievement of certain performance metrics related to our consolidated operating results. At March 31, 2023, we have estimated that these shares will vest at 100% of the original amount based on our assessment of the probable achievement against the relevant performance metrics. On March 9, 2022, our CEO and CFO received restricted stock awards totaling 20,493 shares valued at $200 as of the date of grant. These 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 March 9, 2022. The final vesting percentage will be based on the achievement of certain performance metrics, including 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. At March 31, 2023, we have estimated that these shares will vest at 100% of the original amount based on our assessment of the probable achievement against the relevant performance metrics. On March 8, 2023, our CEO, CFO and the Division Presidents of two of our operating segments received restricted stock awards totaling 18,888 shares valued at $303 as of the date of grant. These 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 March 8, 2023. The final vesting percentage will be based on the achievement of certain performance metrics related to revenue for the year ending December 31, 2025 as determined by the Compensation Committee of our Board of Directors. At March 31, 2023, we have estimated that these shares will vest at 100% of the original amount based on our assessment of the probable achievement against the relevant performance metrics. The following table summarizes the activity related to unvested restricted stock awards for the three months ended March 31, 2023:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Unvested shares outstanding, January 1, 2023 |  |  | 288,450 |  |  | $ | 7.80 |
Granted |  |  | 90,588 |  |  |  | 16.06 |
Vested |  |  | (21,066 | ) |  |  | 12.21 |
Forfeited |  |  | (13,271 | ) |  |  | 9.88 |
Unvested shares outstanding, March 31, 2023 |  |  | 344,701 |  |  |  | 9.71 |
The total fair value of the restricted stock awards that vested during the three months ended March 31, 2023 and 2022 was $381 and $188, respectively, as of the vesting dates of these awards.

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